Travis owns a stock that is currently valued at $45.80 a share. He is concerned that the stock price may decline so he just purchased a put option on the stock with an exercise price of $45. Which one of the following terms applies to the strategy Travis is using?
Put-call parity is defined as the relationship between which of the following variables?
I. risk-free asset
II. underlying stock price
III. call option
IV. put option
Assume the price of Westward Co. stock increases by one percent. Which one of the following measures the effect that this change in the stock price will have on the value of the Westward Co. options?
Assume the standard deviation of the returns on ABC stock increases. The effect of this change on the value of the call options on ABC stock is measured by which one of the following?
The implied volatility of the returns on the underlying asset that is computed using the Black-Scholes option pricing model is referred to as which one of the following?
Which one of the following provides the option of selling a stock anytime during the option period at a specified price even if the market price of the stock declines to zero?
Given the (1) exercise price E, (2) time to maturity T, and (3) European put-call parity, the present value of E plus the value of the call option is equal to the:
Traci wants to have $16,000 six years from now and wants to deposit just one lump sum amount today. The annual percentage rate applicable to her investment is 6.8 percent. Which one of the following methods of compounding interest will allow her to deposit the least amount possible today?
Which of the following affect the value of a call option?
I. strike price
II. time to maturity
III. standard deviation of the returns on a risk-free asset
IV. risk-free rate