Exhibit 22.7 Use the Information Below for the Following Problem(S)

question 24

Multiple Choice

Exhibit 22.7
Use the Information Below for the Following Problem(S)
GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00.
-Refer to Exhibit 22.7.Which strategy is most appropriate for an investor who expects share prices to be volatile,but was inclined to be bullish?

• A) protective put
• B) covered call
• C) long straddle
• D) short straddle
• E) long strap

---

Definitions:

Rate of Return

The gain or loss of an investment over a specified time period, expressed as a percentage of the investment's initial cost.

Monthly Withdrawals

Regular amounts of money taken out of an account, investment, or fund each month, often for retirement income or savings spending.

Compounded Monthly

Refers to the process of calculating interest earnings on a principal amount, where the interest is added back to the principal sum each month, leading to interest earnings on interest.

Discount Rate

It's the interest rate applied in calculations of DCF to find out the current market value of predicted cash flows.