The Buyer of a Bond Call Option

question 46

Multiple Choice

The buyer of a bond call option

• A)receives a premium in return for standing ready to sell the bond at the exercise price.
• B)receives a premium in return for standing ready to buy bonds at the exercise price.
• C)pays a premium and has the right to sell the underlying bond at the agreed exercise price.
• D)pays a premium and has the right to buy the underlying bond at the agreed exercise price
• E)pays a premium and has the obligation to buy the underlying bond at the agreed exercise price

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Definitions:

Capital Structure

The mix of different forms of financing used by a company to fund its overall operations and growth, including debt and equity.

Floatation Expenses

The costs associated with issuing new securities in the market, including underwriting, legal, and registration fees.

Book Value

The net value of a company's assets found on its balance sheet, calculated by subtracting liabilities from the total assets.

Market Values

The current prices at which assets, securities, commodities, or services can be bought or sold in a marketplace, emphasizing the plural to encompass a range of values across various markets.