An Investor (The Buyer) Purchases a Put Option from a Seller

question 46

Multiple Choice

An investor (the buyer) purchases a put option from a seller. On the expiration date of a call option:

• A) the buyer has the obligation to sell the underlying asset and the seller has the right to buy it.
• B) the buyer has the obligation to sell the underlying asset and the seller has the obligation to buy it.
• C) the buyer has the right to sell the underlying asset and the seller has the obligation to buy it.
• D) None of the above

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Definitions:

Commercial Reasonableness

A standard used to evaluate the appropriateness of actions taken in a business context, ensuring they align with typical business practices and norms.

Business Judgment

refers to the decision-making process by corporate directors and officers that is presumed to be in the best interest of the company, protecting them from liability if the decisions are made in good faith and with reasonable care.

Counteroffer

A proposal made in response to an offer, signaling rejection of the initial offer and suggesting a new agreement for negotiation.

Acceptance

The agreement to the terms of an offer, contract, or proposal, thereby creating a binding legal obligation.