Portfolio a Consists of 600 Shares of Stock and 300

question 14

Multiple Choice

Portfolio A consists of 600 shares of stock and 300 calls on that stock.Portfolio B consists of 685 shares of stock.The call delta is 0.3.Which portfolio has a higher dollar exposure to a change in stock price?

• A)Portfolio B
• B)Portfolio A
• C)The two portfolios have the same exposure.
• D)Portfolio A if the stock price increases, and portfolio B if it decreases

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Definitions:

Trend Percentage

A financial analysis tool that shows how a set of financial or quantitative data changes over time, often expressed as a percentage.

Common-size Statement

A financial statement that presents all line items as a percentage of a common base figure, facilitating comparison across time and entities.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company in using its assets to generate sales or revenue, calculated by dividing sales or revenue by the average assets.

Net Sales

The amount of revenue from sales transactions minus returns, allowances for damaged or missing goods, and discounts.