The Payoffs from Holding a Call Option Can Be Replicated

question 78

Multiple Choice

The payoffs from holding a call option can be replicated by:

• A)Borrowing money to buy a put option
• B)Borrowing money to invest in the stock
• C)Simultaneously selling a call and buying a put
• D)Simultaneously buying a share and buying a put

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Definitions:

Accounts Payable

Money owed by a company to its creditors for goods or services that have been received but not yet paid for.

Prepaid Insurance

An asset account that represents insurance payments made in advance of the period in which the insurance coverage applies.

Cash Amount

The total value of cash on hand, including currency, coins, and balances in demand deposit accounts.