The potential gain to a buyer of bond call options is unlimited, even if interest rates decrease to zero.

Name: The potential gain to a buyer of bond call options is unlimited, even if interest rates decrease to zero.
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Question

Quizplus · Accepted Answer

The gain to a buyer of bond call options is limited because as interest rates decrease, the value of the bond increases, but it cannot exceed the bond's face value plus accrued interest, thus capping the potential gain.

The Potential Gain to a Buyer of Bond Call Options