A Put Option Allows the Holder to

question 77

Multiple Choice

A put option allows the holder to

• A)buy the underlying asset at the strike price on or before the expiration date.
• B)sell the underlying asset at the strike price on or before the expiration date.
• C)sell the option in the open market prior to expiration.
• D)B and C.
• E)A and C.

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Definitions:

Scrap Value

The estimated resale value of an asset at the end of its useful life, often considered in depreciation calculations.

Salvage Value

The expected market value an asset will achieve when it is disposed of after its life cycle.

Payback Period

The length of time it takes for an investment to recover its initial cost out of the cash inflows that it generates.

Simple Rate of Return

A method of investment appraisal that calculates the annual incremental net operating income as a percentage of the initial investment.