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A Portfolio Consists of 800 Shares of Stock and 100

question 79

Multiple Choice

A portfolio consists of 800 shares of stock and 100 calls on that stock. If the hedge ratio for the call is 0.5, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?


Definitions:

Wages Payable

A liability account that records the amount of wages earned by employees but not yet paid by the company.

Unearned Rent

Income received by a landlord for rent that has been paid in advance, but which covers a period that has not yet occurred, and is recorded as a liability.

Net Income

The total profit of a company after all expenses are deducted from revenues, also known as the bottom line.

Understated

Described or represented as less than is actually the case; downplayed in expression or estimation.

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