Firms Spend an Increasing Amount of Time Evaluating Real Options,which

question 93

Multiple Choice

Firms spend an increasing amount of time evaluating real options,which are:

• A) options on real assets such as an option to abandon.
• B) call and put options traded on organized exchanges.
• C) call options such as warrants and convertible bonds.
• D) put options such as held by shareholders of a firm with financial leverage.

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Definitions:

Marketable Securities

Financial instruments that can easily be converted to cash quickly at a reasonable price.

Miller-Orr Model

A financial model used to manage cash flow and determine the optimal level of cash reserves for a firm.

Trading Costs

Expenses associated with buying and selling securities, including commissions, spreads, and slippage.

Collection Float

The time period between when a payment is initiated by a debtor and when the funds are actually available to the creditor.