Which of the Following Is the Put-Call Parity Result for a Non-Dividend-Paying

question 19

Multiple Choice

Which of the following is the put-call parity result for a non-dividend-paying stock?

• A) The European put price plus the European call price must equal the stock price plus the present value of the strike price
• B) The European put price plus the present value of the strike price must equal the European call price plus the stock price
• C) The European put price plus the stock price must equal the European call price plus the strike price
• D) The European put price plus the stock price must equal the European call price plus the present value of the strike price

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Definitions:

Required Return

The lowest yearly percentage gain from an investment required to attract individuals or businesses to invest in a specific security or project.

Profitability Index

A calculation used in capital budgeting to determine the relative profitability of an investment, computed as the present value of future cash flows divided by the initial investment cost.

Crossover Rate

The crossover rate is the rate of return at which two projects have the same net present value (NPV), used in capital budgeting to compare the desirability of investments or projects.

Profitability Index

A financial tool used to evaluate the attractiveness of an investment by dividing the present value of future cash flows by the initial investment cost.