Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 22Q: What are the strengths and weaknesses of NPV?
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What is naked call option?
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An option is a financial derivative giving the buyer of option to buy or sell the option at a price and exercise his right. Call option is an agreement to buy the option at the specific price on or before the expiry of option. Put option is an agreement to sell the option at the specified price. Option buyers have only right but no obligation, but option sellers receive premium and have obligations when options buyer exercise their right.
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