Index Put Options Are Used to Provide Protection Against the Value

question 13

Multiple Choice

Index put options are used to provide protection against the value of the portfolio falling below a certain level. Which of the following is true as the beta of the portfolio increases?

• A) The cost of hedging increases
• B) The options require a lower strike price
• C) The number of options required increases
• D) All of the above

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Definitions:

Ratio of Debt

A financial metric that measures the amount of debt a company has compared to its assets or equity, indicating the financial leverage or risk.

Accounting System

A systematic process of recording, reporting, and analyzing financial transactions of a business.

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