The Payoffs from Holding a Call Option Can Be Replicated

question 50

Multiple Choice

The payoffs from holding a call option can be replicated by:

• A) borrowing money to buy a put option.
• B) borrowing money to invest in the stock.
• C) simultaneously selling a call and buying a put.
• D) simultaneously buying a share and buying a put.

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Definitions:

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Expected Inflation

The rate at which the general level of prices for goods and services is anticipated to rise over a specific period.

Fund Providers

Entities or individuals that supply capital or resources to investments, projects, or businesses.

Sole Proprietorships

A business owned and operated by a single individual with no distinction between the business and owner.