Some of the Most Common Applications of Real Options Are

question 82

Multiple Choice

Some of the most common applications of real options are with property and insurance.A real estate option grants the holder the right to buy or sell a piece of property at an established price sometime in the future.If the price of the property goes ________,the owner of the option is likely to buy it.If the market value of the property ________ the strike price,the option holder is unlikely to execute the purchase.

• A) down; goes above
• B) down; drops below
• C) up; drops below
• D) up; goes above

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Definitions:

Phillips Curve

A financial principle illustrating a reverse correlation between unemployment levels and inflation rates within an economy.

Aggregate Demand (AD)

The total demand for all goods and services within an economy at different price levels, during a specific time period.

Unemployment Rate

The fraction of the working-age population that is currently unemployed and looking for a job.

Inflation Rate

The speed at which the overall price level of goods and services increases, leading to a decrease in purchasing power.