You Hold a Portfolio of a Long Position in a Call

question 7

Multiple Choice

You hold a portfolio of a long position in a call and a long position in a put,both for the same strike and maturity.Which of the following statements is true?

• A)When the stock price increases,the rho of the portfolio increases if and only if the call is in-the-money.
• B)When the stock price increases,the rho of the portfolio decreases if and only if the call is out-of-the-money.
• C)When the stock price increases,the rho of the portfolio increases whether or not the call is in-the-money.
• D)When the stock price increases,the rho of the portfolio may increase,decrease or stay constant depending on volatility and depth-in-the-money.

Understand the concept and calculation of predetermined overhead rates.

Identify and record transactions related to the purchase and use of raw materials in production.

Calculate and apply overhead costs to production based on different overhead application rates.

Determine the impact of underapplied or overapplied overhead on cost of goods sold.

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Definitions:

Agent

A person who acts on behalf of another individual (a principal). Principal–agent problems are created by the incentive conflict between principals and agents.

Principal

An individual who hires another (an agent) to act on his or her behalf.

Incentivize

To motivate or encourage someone by providing a reward or incentive.

Fruit Pickers

Laborers who are employed in agriculture to manually harvest fruits from plants and trees.