Delta Importers Has a Pure Discount Loan with a Face

question 86

Multiple Choice

Delta Importers has a pure discount loan with a face value of $180,000 due in one year.The assets of the firm are currently worth $265,000.The shareholders in this firm basically own a _____ option on the assets of the firm with a strike price of _____.

• A)put; $180,000.
• B)put; $265,000.
• C)warrant; $265,000.
• D)call; $180,000.
• E)call; $265,000.

---

Definitions:

Compounded Semi-annually

Interest calculation method where interest is added to the principal sum of a deposit or loan every six months, leading to interest on interest.

Private Loan

A loan sourced from a private entity or individual, as opposed to a government or public lender.

Accrued Interest

Interest that has been incurred but not yet paid, typically relating to bonds or loans.

Pay Off

To completely settle a debt or an obligation.