23-8 The buyer of a bond put option stands to make a profit if changes in market interest rates cause the bond price to fall below the exercise price.

Question

Quizplus · Accepted Answer

A bond put option gives the buyer the right to sell the bond at the exercise price, which means they will make a profit if the market interest rates rise, causing the bond price to fall below the exercise price. This is because the bond becomes less attractive to investors as rates rise, which drives down its price. Therefore, the statement is true.

23-8 the Buyer of a Bond Put Option Stands to Make