Suppose You Bank at Bank a and You Write a Check

question 34

Multiple Choice

Suppose you bank at Bank A and you write a check to your friend,who banks at Bank B.What happens after the check clears?

• A)Both Bank A's and Bank B's assets increase.
• B)Both Bank A's and Bank B's assets decrease.
• C)Bank A's assets increase and Bank B's assets decrease.
• D)Bank A's assets decrease and Bank B's assets increase.
• E)There is no change in either bank's assets.

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Definitions:

Call Options

Financial contracts giving the option buyer the right, but not the obligation, to buy a stock, bond, commodity, or other assets at a specified price within a specific time period.

European Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell an asset at a specified price only on the option's expiration date.

Conversion Price

The price per share at which a convertible security, such as convertible bonds or convertible preferred stock, can be converted into common stock.

American Option

A type of options contract that allows the holder to exercise the option at any point up to and including the expiration date.