A Portfolio Consists of 225 Shares of Stock and 300

question 63

Multiple Choice

A portfolio consists of 225 shares of stock and 300 calls on that stock. If the hedge ratio for the call is 0.4, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?

• A) −$345
• B) +$500
• C) −$580
• D) −$520

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Definitions:

Invoice Paid

A document or bill that has been settled or paid in full.

Credit Card Discount

A fee charged by credit card processors to merchants for accepting credit card payments, often a percentage of the transaction value.

Net Sales

Revenue from sales minus returns, allowances, and discounts.

Net Income

The residual financial gain of a company post all expenses and taxes being deducted from the revenue.