Which of the Following Statements Is FALSE

question 40

Multiple Choice

Which of the following statements is FALSE?

• A)The option delta,Δ,has a natural interpretation: It is the change in the price of the stock given a $1 change in the price of the option.
• B)Because a leveraged position in a stock is riskier than the stock itself,this implies that call options on a positive beta stock are more risky than the underlying stock and therefore have higher returns and higher betas.
• C)Only one parameter input for the Black-Scholes formula,the volatility of the stock price,is not observable directly.
• D)Because a stock's volatility is much easier to measure (and forecast)than its expected return,the Black-Scholes formula can be very precise.

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Definitions:

Minor

A person under the age of legal adulthood, which varies by jurisdiction but is commonly 18 years old.

Contract

A legally enforceable agreement between two or more parties with mutual obligations.

Voidable

A legal term describing a contract or transaction that may be declared invalid by one of the parties to the contract.

Minor's Option

The legal ability of a minor to affirm or void contracts and agreements, based on their lack of legal capacity to enter into contracts.