A Portfolio Consists of 100 Shares of Stock and 1500

question 21

Multiple Choice

A portfolio consists of 100 shares of stock and 1500 calls on that stock. If the hedge ratio for the call is 0.7, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?

• A) +$700
• B) +$500
• C) −$1,150
• D) −$520

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