While Having a Discussion, Technician a Says That Normal Head

question 6

Multiple Choice

While having a discussion, Technician A says that normal head bolt torque values have a calculated safety factor of about 25% less than the maximum amount a bolt can be torqued without becoming permanently stretched. Technician B says that the safety factor is about 5%. Who is correct?

• A) A only
• B) B only
• C) Both A and B
• D) Neither A nor B

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Definitions:

Hedge Ratio

A ratio used to determine the amount of derivatives needed to hedge a particular exposure, indicating the relationship between the position size in hedging instruments and the size of the exposure.

American Put Options

Contracts that give the holder the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time period.

European Puts

Options contracts giving the holder the right, but not the obligation, to sell a specific amount of an underlying asset at a predetermined price within a specified time frame.

Black-Scholes Model

A mathematical model used to price European options, factoring in stock volatility and time to expiration.