Question

In: Finance

A call option contract: Multiple Choice A obligates both the buyer and the seller. B obligates...

A call option contract:

Multiple Choice

A obligates both the buyer and the seller.

B obligates the buyer but not the seller.

C grants rights to the buyer and obligates the seller.

D grants rights to the seller and obligates the buyer.

E grants rights to both the buyer and the seller but does not obligate either party.

Solutions

Expert Solution

Option buyer has the option to exercise it or not at his will and the seller is bound to fulfill the order. The buyer pays an upfront premium for the right to do so. Therefore option C is correct. Option D becomes incorrect automatically

Only buyer has the right so option E is incorrect and Only seller is obliged so options A and B are also incorrect.

jeff jeffy answered 2 years ago
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