A Replicating Portfolio for a Derivative Security Is

question 19

Multiple Choice

A replicating portfolio for a derivative security is

• A)A portfolio consisting of long and short positions in the derivative.
• B)A portfolio that has the same payoffs as the derivative.
• C)A portfolio that has payoffs at least as great as,and in some states greater than,the payoffs from the derivative.
• D)A portfolio that combines the derivative with another derivative on the same underlying so as to make the portfolio riskless.

Understand the implications of different mortgage types and terms, including adjustable-rate mortgages, FHA and VA loans, and home equity loans.

Know the benefits and responsibilities of home ownership, including maintenance, insurance, and property tax considerations.

Understand the role and services provided by real estate agents in the home buying and selling process.

Understand how to calculate affordable home purchase prices based on income, debt, mortgage rates, and down payments.

---

Definitions:

Excise Tax

A tax charged on specific goods and services, such as gasoline, tobacco, and alcohol.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied, typically upward sloping.

Sales Tax

A tax levied on the sale of goods and services, typically calculated as a percentage of the purchase price.

Perfectly Elastic

A situation in demand where consumers will buy an infinite quantity of goods at a certain price but none if the price increases even slightly.