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

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Definitions:

Forward Rate

An agreed-upon price for a financial transaction that will occur at a future date, used in forward contracts.

Denominated

Describes a financial instrument that is specified in a particular currency.

Single-Country Funds

Investment funds that focus on securities from a specific country, offering exposure to the economic performance and growth of that nation.

Mutual Funds

Funds that gather capital from various investors to buy an assorted mix of stocks, bonds, or other financial instruments.