Equity and Debt in a Firm Are Option-Like

question 25

Multiple Choice

Equity and debt in a firm are option-like. Which of the following options are they?

• A) Equity is akin to a short call and debt is akin to a package containing a long put.
• B) Equity is akin to a long call and debt is akin to a package containing a short put.
• C) Equity is akin to a short put and debt is akin to a package containing a long call.
• D) Equity is akin to a long put and debt is akin to a package containing a short call.

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