- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 7. The Value of a European Option at Expiration
CFA Practice Question
A LONG position in an American call option ______.
B. gives the investor an extra right that a LONG position in an identical European call option would not give him
C. can only be exercised on the option's expiration date
A. gives the investor only the rights that a LONG position in an identical European call option would give him
B. gives the investor an extra right that a LONG position in an identical European call option would not give him
C. can only be exercised on the option's expiration date
Correct Answer: B
An American option may be exercised prior to the expiration date. This represents a right not allowed by a European option.
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