Consider an Option That Pays $1000 If the Stock Price $\left[ K _ { 1 } , K _ { 2 } \right]$

question 20

Multiple Choice

Consider an option that pays $1000 if the stock price at maturity falls outside a range $\left[ K _ { 1 } , K _ { 2 } \right]$ . Which of the following is valid?

• A) The option may be written as the sum of two barrier options.
• B) The option decreases in value as \(K _ { 2 } - K _ { 1 }\) decreases.
• C) The option may be written as the sum of two asset-or-nothing options.
• D) The option may be written as the sum of two cash-or-nothing options.

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Definitions:

Debt Covenants

Agreements or conditions included in debt contracts that the borrower must adhere to, designed to protect the lender by restricting the borrower’s activities and enhancing the likelihood of debt repayment.

SEC

The U.S. Securities and Exchange Commission, a federal agency responsible for enforcing federal securities laws and regulating the securities industry.

Debt Securities

Financial instruments representing money borrowed by an issuer to be repaid with interest, such as bonds, notes, and bills.

Financial Performance

The measure of a firm's profitability, liquidity, and solvency, reflecting its overall health and efficiency at generating profits.