A Short Forward Contract on an Asset Plus a Long

question 13

Multiple Choice

A short forward contract on an asset plus a long position in a European call option on the asset with a strike price equal to the forward price is equivalent to

• A) A short position in a call option
• B) A short position in a put option
• C) A long position in a put option
• D) None of the above

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Definitions:

Total Liabilities

The total of all financial obligations owed by a business to creditors, including loans, accounts payable, and other debts.

Retained Earnings

The portion of a company's profits that are not distributed as dividends to shareholders but are kept by the company for reinvestment.

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders.

Dividends

Payments made by a corporation to its shareholder members. It is the share of profits and retained earnings that the company pays out to its shareholders.