An Option Is a Contract That Always

question 99

Multiple Choice

An option is a contract that always

• A) gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract.
• B) gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract.
• C) states that the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price.
• D) gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract.

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Definitions:

Short-Term Debt

Short-Term Debt is borrowed money that a company must repay within the short term, typically within a year, often used for operational expenses.

Interest Rate Fluctuations

Changes in the interest rate over time, affecting borrowing costs, savings rates, and investment returns.

Refund Risk

The risk that a debt issuer will repay borrowed funds before the maturity date, typically in a declining interest rate environment.

Working Capital Policy

A strategic approach to managing a company's short-term assets and liabilities to ensure it has sufficient liquidity to meet its short-term obligations.