An Investor Planning to Buy IBM Stock in 30 Days

question 28

Multiple Choice

An investor planning to buy IBM stock in 30 days can protect himself against price risk by

• A) selling an IBM put option that matures in 30 days
• B) buying an IBM call option that matures in 30 days
• C) selling an IBM call option that matures in 30 days
• D) buying an IBM put option that matures in 30 days
• E) selling IBM stock short

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Definitions:

Sales

The activities involved in selling products or services, or the total amount of goods or services sold.

Times-Interest-Earned Ratio

A fiscal indicator that evaluates a firm's capacity to satisfy its debt commitments utilizing its present income.

Operating Costs

Expenditures that are necessary for the day-to-day operations of a business, including costs related to manufacturing, sales, and administration.

Interest Charges

Interest charges are the costs incurred by an entity for borrowing money, quantified as a percentage of the principal loan amount.