When an MNC acquires a target and knows that it will be able to sell the acquisition at any time during the next three years at a specific price, the MNC has acquired a put option on real assets.

Question

Quizplus · Accepted Answer

Acquiring a put option gives the holder the right, but not the obligation, to sell an underlying asset at a specified price within a specified period of time. In this case, the MNC has acquired a put option on the real assets of the target, as it has the ability to sell the acquisition at a specific price within the next three years.

When an MNC Acquires a Target and Knows That It