A Digital Default Option

Multiple Choice

A digital default option

A) always pays the par value of a loan if exercised.
B) has a payout that is capped at 80 percent of the par value of the loan.
C) will cause the FI never to lose more than the premium paid to purchase the option.
D) always pays the par value of a loan if exercised and will cause the FI never to lose more than the premium paid to purchase the option.
E) always pays the par value of a loan if exercised and has a payout that is capped at 80 percent of the par value of the loan.