Which of the Following Factors Does Not Affect the Initial

question 31

Multiple Choice

Which of the following factors does not affect the initial market price of a stock?

• A) The company's anticipated future earnings
• B) The par value of the stock
• C) The current state of the economy
• D) The expected dividend rate per share

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Definitions:

Hedge Ratio

The ratio used to determine the appropriate amount of hedging required to protect a position or portfolio from price fluctuations.

Option Smirk

A pattern on the implied volatility graph for options across different strike prices that shows asymmetric volatility, often indicating market anticipation of movement.

Black-Scholes Option

A mathematical model used to price European options and derivatives by estimating the variation over time of financial instruments.

Implied Volatility

The market's forecast of a likely movement in a security's price, often derived from the price of its options.