To Find the Beta of a Call Option, One Can

question 2

True/False

To find the beta of a call option, one can calculate the portfolio beta of the replicating stock and risk-free loan.

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Definitions:

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Net Present Value

A method of evaluating investments by calculating the present value of all expected future cash flows, minus the initial investment cost.

Rate of Return

A measure of the gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Desired Rate

An anticipated rate of return on investment or interest rate target, often set as a benchmark for financial decisions or investment appraisal.