Consider an Option That Gives the Owner the Right to Buy

question 20

Multiple Choice

Consider an option that gives the owner the right to buy a stock for $20 only on the third Friday of May, next year. The option being described is:

• A) an American call option.
• B) a European put option.
• C) an American put option.
• D) a European call option.

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Definitions:

Solve

Refers to finding the value or values that satisfy an equation or system of equations.

Linear Equation

An algebraic equation in which each term is either a constant or the product of a constant and a single variable, and the graph forms a straight line.

Solve

Finding the value of variables that satisfy a given mathematical equation or inequality.

Linear Equation

An equation between two variables that produces a straight line when graphed.