Why are options most likely so attractive to companies?
A)The writer of the option does not charge the company any fee for writing the option.
B)Options provide companies with more flexibility than a forward contract.
C)Options are usually cheaper than forward contracts.
D)Options can be used for only foreign-exchange deals.

Question

Quizplus · Accepted Answer

Options provide companies with the flexibility to choose whether or not to execute the contract, which is not available in a forward contract. This flexibility allows companies to hedge their risks more effectively. Options can also be tailored to meet specific needs of the company. Additionally, the cost of an option premium can be lower than the cost of a forward contract.

Why Are Options Most Likely So Attractive to Companies