Portfolio a Consists of 400 Shares of Stock and 400

question 34

Multiple Choice

Portfolio A consists of 400 shares of stock and 400 calls on that stock. Portfolio B consists of 500 shares of stock. The call delta is 0.5. Which portfolio has a higher dollar exposure to a change in stock price?

• A) Portfolio B
• B) Portfolio A
• C) The two portfolios have the same exposure.
• D) Portfolio A if the stock price increases and portfolio B if it decreases
• E) Portfolio B if the stock price increases and portfolio A if it decreases

---

Definitions:

Legal Ownership

The recognized right under the law of a person or entity to possess, use, and dispose of a particular property or asset.

Acceptance

A key factor in the agreement element of a contract; consists of the agreement of one party, the offeree, to the terms of the offer in the contract made by the other party, the offeror.

True Value

The actual, intrinsic value of an asset, investment, or property, considering all underlying factors.

Commingled Fungible Goods

Items that are interchangeable with others of the same type, which have been mixed or blended, making individual properties indistinguishable.