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Basic Question 1 of 16
Which of the following instruments gives the owner the right to purchase securities directly from the firm at a fixed price for a specified time?
II. Call option
III. Put option
I. Warrant
II. Call option
III. Put option
User Contributed Comments 10
| User | Comment |
|---|---|
| LondonBoy | Why not I & II ? |
| niti | Question says directly from firm.Hence ans is I only. |
| danlan | That's the difference between Warrant and Call option: directly from firm/not. |
| mtcfa | Got it. |
| Rotigga | Caught me off guard. Good question. |
| cslau83 | Call could be direct from company when company writes call. |
| gulfa99 | "for a specified time" |
| Creep | Indeed, it's the "specified time" clause that is the kicker.... |
| jonan203 | "specified time" has nothing to do with it, call and put options have a limited life over a "specified time" as well; however, they are traded on exchanges, not by the company! |
| gill15 | Damn...nice catch--- some of these just get you... |
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Learning Outcome Statements
explain the relationships between the values of a callable or putable bond, the underlying option-free (straight) bond, and the embedded option;
describe how the arbitrage-free framework can be used to value a bond with embedded options;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.