Question

One important difference between real and financial options is that you can independently decide on whether to acquire each financial option, but real options are often mutually exclusive so that sometimes acquiring one might preclude acquiring another.

True

False

Answer 1

The given statement is true.

Explanation :-Real options are generally options available to managers reagarding any Investment opportunity or capital budgeting project .some example of real options are option to expand ,option to abandon ,option to wait or defer.

Therefore they are generally mutually exclusive because for example expansion and abandonment of any project both at a time is not possible.

While financial options are the options which provides right but not the obligation to buy or sell any asset .Some examples are put ,call etc

Here we can independently decide whether to buy call or put.We can buy or sell call and put simultaneously at a time.