A Portfolio Consists of 100 Shares of Stock and 1500

question 21

Multiple Choice

A portfolio consists of 100 shares of stock and 1500 calls on that stock. If the hedge ratio for the call is 0.7, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?

• A) +$700
• B) +$500
• C) −$1,150
• D) −$520

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Definitions:

Judgments

Decisions or conclusions reached after consideration, often in a legal context or in personal assessment.

Empirical Economics

The branch of economics that focuses on using data and statistical methods to analyze and test economic theories.

Economic Theories

The principles and models that aim to explain how economies work and how economic agents interact.

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The branch of economics that focuses on describing the economies or economic events.