Holly Kombs, a speculator, expects interest rates to decline in the near future. Thus, she purchases a call option on interest r
ate futures with an exercise price of 92-10. The premium on the call option is 2-24. Just before the expiration date, the price of Treasury bond futures is 97-14. At this time, Kombs decides to exercise the option and closes out the position by selling an identical futures contract. A) True
B) False
True, it is a valid financial operation and Holly Kombs actually made a profit from it.
Explanation:
When Holly Kombs purchased the call option the price of the bond was 92.10 and the call option had a premium of 2.24. When the bond finally reached a price of 97.14, holly Kombs decided to exercise her call option and bought the bonds at 92.10.
d) Sales increase at a decreasing rate as fewer new buyers enter the market.
Explanation:
The life cycle has four stages - introduction, growth, maturity and decline. While some products may stay in a prolonged maturity state, all products eventually phase out of the market due to several factors including saturation, increased competition, decreased demand and dropping sales
