Question : Statement 1: A call option gives the holder the right, but not the obligation, to sell an asset at a specified price.
Statement 2: A call option gives the holder the right to buy an asset at a specified price.
Option 1: Statement 1 is true, and statement 2 is true.
Option 2: Statement 1 is true, but statement 2 is false.
Option 3: Statement 1 is false, and statement 2 is true.
Option 4: Statement 1 is false, and statement 2 is false.
Correct Answer: Statement 1 is false, and statement 2 is true.
Solution : The correct answer is (c) Statement 1 is false, and statement 2 is true.
Statement 1 is false. A call option provides the holder the right (but not obligation) to buy an underlying asset at a specified price (strike price) within a specific period.
Statement 2 is true. A call option indeed gives the holder the right to buy the underlying asset at a predetermined price (strike price) within a specified period.