Kizspy | Question: 40
(Choose 1 answer)
A local city government has awarded a contract to sequentially build five new elementary schools over the next
10 years. The price for each school has been spelled out in the contract, but at the beginning of each year the
city can cancel the order for the remaining schools. The city government is concerned that if the population of
the town does not grow as expected it may not need all of the schools. What type of financial option does the
option to cancel the order resemble?
A. Owning a call option on the value of the new schools
B. Owning a put option on the value of the new schools
C. Selling a call option on the value of the new schools
D. Selling a put option on the value of the new schools
