A Put Option on the S&P 500 Index Will Best

question 22

Multiple Choice

A put option on the S&P 500 Index will best protect a portfolio

• A)of 100 shares of IBM stock.
• B)of 50 bonds.
• C)that corresponds to the S&P 500.
• D)of 50 shares of AT&T and 50 shares of Xerox stocks.

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Definitions:

Monthly Compounding

The process of calculating interest earnings on a principal amount, where the interest is added back to the principal at the end of each month, increasing the base for calculating future interest.

Future Value

Future worth of cash or an asset that is akin in value to a nominated sum in the present.

Annually

Pertaining to events or actions that occur once every year.

Present Value

The present worth of a future sum of money or sequence of cash payments, reduced at a particular rate of interest.