Buying a Call Option on a Bond Ensures a Bank

question 56

True/False

Buying a call option on a bond ensures a bank that it will be able to sell the bond at a given point in time for a price at least equal to the exercise price of the option.

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Definitions:

Permanent Accounts

Accounts that carry their balances over into the next accounting period, such as assets, liabilities, and equity accounts.

End-of-period Spreadsheet

A tool used in accounting to compile all financial information before closing the books at the end of a reporting period.

Spreadsheet Heading

The title section at the top of a spreadsheet document that typically contains the name of the spreadsheet, columns, rows, or specific data identifiers.

Adjusted Trial Balance

A statement showing all balances of ledger accounts after adjustments, used to prepare financial statements.