Buying the Stock and the Put Option on the Stock

question 44

Multiple Choice

Buying the stock and the put option on the stock provides the same payoff as:

• A) investing the present value of the exercise price in T-bills and buying the call option
• B) on the stock
• C) short selling the stock and buying a call option on the stock
• D) writing (selling) a put option and buying a call option on the stock
• E) none of above

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Definitions:

Z-score

A statistic that tells you how many standard deviations a given value is from the mean.

Sample Mean

The average value of a sample set, calculated by summing all observations and dividing by the number of observations.

Sampling Distribution

The probability distribution of a statistic based on a large number of samples drawn from a specific population.

Sample Size

The number of individuals or observations included in a subset of a population for the purpose of statistical analysis.