Suppose You Buy a Call and Lend the Present Value

question 3

Multiple Choice

Suppose you buy a call and lend the present value of its exercise price. You could match the payoffs of this strategy by:

• A) Buying the underlying stock and selling a call
• B) Selling a put and lending the present value of the exercise price
• C) Buying the underlying stock and buying a put
• D) Buying the underlying stock and selling a put

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Definitions:

Driving Violation

An act of breaking or disregarding the laws that regulate vehicle operation on public roads, potentially leading to penalties such as fines, points on a license, or other legal consequences.

Social Insurance

A system where government or a public agency provides financial support to individuals to cover specific risks such as unemployment, aging, or disability.

Government Spends

The total financial expenditures of a government on public services, infrastructure, defense, welfare, and administration.

Insurable Interest

A party who has an interest in property or life.