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:

Work in Process

Inventory that includes partially completed goods that are in the process of being manufactured but are not yet finished products.

Finished Goods

Products that have completed the manufacturing process and are ready for sale.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Machine-hours

A measure of the amount of time machines are operated, used in allocating overhead costs.