The Value of a Real Option Can Be Calculated Using

question 4

Multiple Choice

The value of a real option can be calculated using:

• A)The Black-Scholes option pricing model
• B)Binomial options pricing model
• C)Discounted cash flow analysis
• D)(a)or (b)

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Definitions:

Trading To Available-For-Sale

The process of reclassifying a security from being actively traded to being held with the intention not to sell in the near term.

Comprehensive Income

The total change in equity for a reporting period other than from transactions with owners, including all non-owner changes in equity such as unrealized gains and losses.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Trading Securities

Financial instruments that are bought and sold for the purpose of generating profits on short-term fluctuations in price.