the economics of money, banking, and financial markets

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5. 
   

   The seller of an option has the ____ to buy or sell the underlying asset, while the
   purchaser of an option has the ____ to buy or sell the asset.
   A) obligation; right
   B) right; obligation
   C) obligation; obligation
   D) right; right
   Answer: A
   Diff: 2 Type: MC Page Ref: 334
   Skill: Recall
   Objective List: 14.3 Explain how managers of financial institutions use financial derivatives to
   manage interest-rate and foreign-exchange risk

   
   


6. 
   

   An option that can be exercised at any time up to maturity is called a(n) ____.
   A) swap
   B) stock option
   C) European option
   D) American option
   Answer: D
   Diff: 2 Type: MC Page Ref: 334
   Skill: Recall
   Objective List: 14.3 Explain how managers of financial institutions use financial derivatives to
   manage interest-rate and foreign-exchange risk

   
   


7. 
   

   An option that can be exercised only at maturity is called a(n) ____.
   A) swap
   B) stock option
   C) European option
   D) American option
   Answer: C
   Diff: 2 Type: MC Page Ref: 334
   Skill: Recall
   Objective List: 14.3 Explain how managers of financial institutions use financial derivatives to
   manage interest-rate and foreign-exchange risk

   
   


8. 
   

   Options on individual stocks are referred to as ____.
   A) stock options
   B) futures options
   C) American options
   D) individual options
   Answer: A
   Diff: 2 Type: MC Page Ref: 334
   Skill: Recall
   Objective List: 14.3 Explain how managers of financial institutions use financial derivatives to
   manage interest-rate and foreign-exchange risk