If You Want the Right, but Not the Obligation, to Buy

question 11

Multiple Choice

If you want the right, but not the obligation, to buy a stock at a specified price you should:

• A)buy a call.
• B)sell a call.
• C)buy a put.
• D)sell a put.
• E)either sell a call or buy a put.

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Definitions:

Revenue Expenditures

Operating expenses that are fully expensed in the accounting period when incurred and primarily related to the maintenance and repair of assets.

Balance Sheet Expenditures

Expenses that are reflected in the balance sheet, usually through an adjustment of assets or liabilities.

Commercial Substance

A concept that an economic transaction has a significant impact on the future cash flows of a company, justifying its recognition.

Plant Assets

Long-term tangible assets, such as buildings, machinery, and equipment, used in the operation of a business and not intended for resale.