Multiple Choice
Consider a portfolio consisting of a long call with an exercise price of X,a short position in a non-dividend paying stock at an initial price of S0,and the purchase of riskless bonds with a face value of X and maturing when the call expires.What should such a portfolio be worth?
A) C + P - X(1 + r) -T
B) C - S0
C) P - X
D) P + S0 - X(1 + r) -T
E) none of the above
Correct Answer:
Verified
Correct Answer:
Verified
Q1: The lower bound of a European call
Q2: The time value of a call is
Q4: Another expression for intrinsic value is<br>A)parity<br>B)parity value<br>C)exercise
Q5: An American call should be exercised early
Q6: Holding everything else constant,a longer-term European put
Q7: At expiration the call price must converge
Q8: An option can be priced at less
Q9: The difference between an American call's price
Q10: The following quotes were observed for options
Q11: The lower the exercise price,the more valuable