Master–feeder Investment Structure! Trivia Questions Quiz

Explanation
The statement accurately describes an option contract. It states that the buyer has the right, but not the obligation, to buy or sell an underlying asset at a specific price within a certain timeframe. This means that the buyer has the choice to exercise the option or not, depending on market conditions and their own preferences. Therefore, the correct answer is true.

Explanation
A put option gives the option to sell the underlying asset. When an investor purchases a put option, they have the right, but not the obligation, to sell the underlying asset at a predetermined price (strike price) within a specified time period. This allows the investor to profit from a decrease in the price of the underlying asset. Therefore, the correct answer is put.

Explanation
The strike price refers to the predetermined price at which the underlying asset can be bought or sold in an options contract. It is the price at which the option holder has the right to exercise their option. Therefore, the statement that the price at which the underlying asset may be exercised is called the strike price is true.

Explanation
An option contract is a financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) within a specified time period. The premium is the price paid by the buyer to the seller for this right. Dividend rate, on the other hand, is the rate at which a company distributes its earnings to its shareholders. It is not relevant to an option contract as it does not affect the value or terms of the contract. Therefore, dividend rate does not appear on an option contract.

Explanation
A European option is a type of financial contract that can only be exercised on its expiration date. This means that the option holder can only choose to buy or sell the underlying asset at the agreed-upon price on the expiration date. Unlike American options, which can be exercised at any time before expiration, European options have this restriction. Therefore, the statement "A European Option can only be exercised on expiration" is true.

Explanation
Buyers of Options are often referred to as "Writers" because they have the right, but not the obligation, to sell or buy an underlying asset at a specified price within a specific time period. They "write" or create the option contract, giving them the ability to sell or buy the asset. The term "writers" emphasizes their role in initiating the option contract by paying a premium to the seller, who is then obligated to fulfill the contract if the buyer decides to exercise their right.