A Call Option on a Share Is a Financial Instrument

question 103

Multiple Choice

A call option on a share is a financial instrument defined by which of the following statements?

• A)It obligates the investor holding it to sell the share at the specified price at the stated date in the future.
• B)It obligates the investor holding it to buy the share at the specified price at the stated date in the future.
• C)It gives the investor holding it the right,but not the obligation,to buy the share at the specified price at the stated date in the future.
• D)It gives the investor holding it the right,but not the obligation,to sell the share at the specified price at the stated date in the future.

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Definitions:

Bond Sinking Fund

A fund set aside by a debtor to repay a bond or loan at its maturity, contributing to financial stability.

Future Maturity

A term referring to the date on which an investment or payment becomes due for settlement.

Redeem

The act of paying off or buying back securities or debts, typically at maturity or before, often for a specified price.

Initial Deposit

The first sum of money placed into an account, often marking the account's opening and establishing an initial balance.