A Number of Prominent Observers Expect the Equity Risk Premium

question 2

Multiple Choice

A number of prominent observers expect the equity risk premium in the future to be:

• A)considerably lower than that of the past.
• B)considerably higher than that of the past.
• C)very similar to the historical average.
• D)very similar to the recent value.

Understand the components of the Black-Scholes option pricing model and which inputs are observable or not directly observable.

Analyze the impact of various factors (e.g., dividend policies, level of interest rates, time to expiration, stock price volatility) on the value of call and put options.

Calculate and interpret the exposure of portfolios that include stock and options to changes in stock price.

Identify and apply the relationship between call and put hedge ratios.

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