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.

Understand the relationship between interest rates and the present value of future payments.

Understand the concepts of the inflationary premium and real versus nominal interest rates.

Understand the effects of real interest rate changes on investment and consumption decisions.

Understand the concept of interest and different perspectives surrounding it.

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Non-Hispanic White Male

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Asian American Female

An individual who identifies as a woman, of Asian descent, and living in or has cultural ties to America.

Dopamine

A neurotransmitter involved in reward, motivation, memory, attention, and even regulating body movements.