One of the major differences between a real option and a financial option is that
A) a real option is not traded in competitive markets.
B) a real option is traded in competitive markets.
C) a real option is less risky than a financial option.
D) a real option has more risk than a financial option.

Question

Quizplus · Accepted Answer

A real option is a decision-making tool used in management, while a financial option is a contract between two parties that enables the holder to buy or sell an underlying asset at a predetermined price within a specified period. Real options are not traded in competitive markets, whereas financial options are traded in organized exchanges or over-the-counter markets. Therefore, choice A is the correct answer.

One of the Major Differences Between a Real Option and a Financial