23-4 The buyer of a bond call option stands to make a positive payoff if changes in market interest rates cause the bond price to rise above the exercise price.

Question

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The buyer of a bond call option has the right to buy a bond at a specific exercise price, and they stand to make a positive payoff if market interest rates cause the bond price to rise above the exercise price. This is because a higher bond price would make the bond more valuable to the option holder, allowing them to purchase it at a lower price than the current market value.

23-4 the Buyer of a Bond Call Option Stands to Make