Warranty Claims, Customer Complaints, and Costs of Litigation Are Examples

question 19

Multiple Choice

Warranty claims, customer complaints, and costs of litigation are examples of __________ costs.

• A) Internal failure
• B) External failure
• C) Appraisal
• D) Prevention
• E) Replacement

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Definitions:

Call Contract

A financial contract that gives the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a predetermined price within a specified time period.

Put Contract

A financial agreement that grants the holder permission, but not the requirement, to sell a certain amount of an underlying asset at a predetermined price before a certain deadline.

Call Premium

The additional cost over the par value that an investor must pay to purchase a callable security before its maturity date.

Strike Price

The predetermined price at which the holder of an option can buy (call) or sell (put) the underlying asset, until the option expires.