Which of the following is a characteristic of a real option?
A)The call option on a stock exercised if some average of the prices of its components passes a critical level.
B)The right to postpone construction on the basis of net present value calculation.
C)The put option on a stock that need to be paid for (at a predetermined price) if they are actually exercised.
D)The right to sell an option at the strike price.

Question

Quizplus · Accepted Answer

A real option refers to the flexibility or potential future opportunities that a project or investment may offer. It is not a standardized financial instrument like a call or put option. Option to postpone construction based on net present value calculation is an example of a real option.

Which of the Following Is a Characteristic of a Real