Which of the Following Statements Is Correct

question 45

Multiple Choice

Which of the following statements is correct?

• A)You should accept project A since its IRR > 15%.
• B)You should reject project B since its NPV > 0.
• C)Your should accept project A since its NPV < 0.
• D)You should accept project B since its IRR < 15%.

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Definitions:

Exercise Price

The price at which the holder of an option contract may buy (in the case of a call option) or sell (in the case of a put option) the underlying asset when the option is exercised.

Underlying Asset

The financial asset upon which derivative instruments, such as futures, options, or warrants, are based or derived from.

European Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a set price on a specific expiration date, only exercisable at the end of its term.

Expiration Date

The specific date upon which an options or futures contract becomes void and the holder must execute or relinquish the contract.