Buying a Call Option, Investing the Present Value of the Exercise

question 43

Multiple Choice

Buying a call option, investing the present value of the exercise price in T-bills, and short selling the underlying share is the same as:

• A) Buying a call and a put
• B) Buying a put and a share
• C) Buying a put
• D) Selling a call

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Definitions:

Production Possibilities Frontier

A curve that shows the different combinations of various goods that a country can produce given certain resources and technology.

Full Employment

Employment level when there is no cyclical unemployment.

Command Economy

An economic system where the government makes all decisions regarding what goods should be produced, how they should be produced, and who gets them.

Inefficiency

A lack of efficiency, where resources are not utilized in the best possible manner, often leading to waste or lost opportunities.