Put-Call Parity Is Valid for

question 7

Multiple Choice

Put-call parity is valid for

• A)Stock returns that are normally distributed,that is,stock movements are symmetric,but not otherwise.
• B)American calls and puts when the stock pays no dividends.
• C)European calls and puts when the stock pays dividends.
• D)Stocks but not for currencies.

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Definitions:

Cost Flow Assumption

An accounting principle that determines the method used to assign costs to inventory and to cost of goods sold, including FIFO, LIFO, and average cost methods.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company. This includes the cost of materials and direct labor.

LIFO Liquidation

The process of selling older inventory items purchased at lower costs, which can lead to an artificially higher reported profit due to inflation.

Pre-tax Effect

The impact of an event or transaction on a company's financials before taking into account the effects of income tax.