Real Options: Consider a Lease Agreement Recently Offered by a Car

question 35

Multiple Choice

Real options: Consider a lease agreement recently offered by a car dealership. The agreement gives the customer the right to use a new SUV for three years in exchange for payments of $550 per month. At the end of the lease, the customer can choose to purchase the SUV for $15,000. What sort or option does this resemble?

• A) A put option on the SUV with a strike price of $15,000
• B) A call option on the SUV with a strike price of $15,000
• C) A put option on the SUV with a strike price of $19,800
• D) A call option on the SUV with a strike price of $19,800

---

Definitions:

Marginal Tax Rate

The tax rate that applies to the next dollar of taxable income, indicating how much of any additional income will be taken in taxes.

Sales Tax

A consumption tax imposed by the government on the sale of goods and services.

Structural

Relating to the underlying or foundational aspects or structures of a system, organization, or building.

Lump-Sum Tax

A tax that is a fixed amount and does not vary with the taxpayer's income or consumption levels.