Suppose an Investor Buys One Share of Stock and a Put

question 38

Multiple Choice

Suppose an investor buys one share of stock and a put option on the stock and simultaneously sells a call option on the stock with the same exercise price. What will be the value of his investment on the final exercise date?

• A)Above the exercise price if the stock price rises and below the exercise price if it falls
• B)Equal to the exercise price regardless of the stock price
• C)Equal to zero regardless of the stock price
• D)Below the exercise price if the stock price rises and above if it falls

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Definitions:

Shift of the Supply Curve

A movement of the entire supply curve to the left or right, caused by a change in a factor other than the price of the good or service itself, indicating a change in the quantity supplied at every price.

Quantity of Loanable Funds

The total amount of funds available for borrowing in the financial markets, based on savings and the supply of credit.

Ball Court

A specific area designated for playing ball games, often found in ancient Mesoamerican sites, used for religious and social activities.

Mesoamerican Cultures

Refers to the various civilizations that flourished in Mexico and Central America before Spanish colonization, including the Aztec and Maya.