The Writer of a Put Option on a Stock

question 14

Multiple Choice

The writer of a put option on a stock

• A) Has the right but not the obligation to sell the stock.
• B) Has the right but not the obligation to buy the stock.
• C) Has the obligation but not the right to sell the stock.
• D) Has the obligation but not the right to buy the stock.

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Definitions:

Contract Rate

The agreed-upon price or interest rate specified within a contract.

Bond Indenture

A legal document specifying the terms and conditions of a bond issue, including the interest rate, maturity date, and other obligations of the issuer.

Bondholders

Individuals or institutions that hold the debt securities issued by corporations or governmental entities.

Discount on Bonds Payable

The difference between the par value of a bond and its lower selling price, recognized as an expense over the life of the bond.