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:

Net Method

A pricing strategy where the sale price of a good or service includes all discounts and is not subject to additional discounts at the time of payment.

Periodic Inventory System

An inventory management method where stock levels and the cost of goods sold are calculated at set intervals.

Terms 2/10, N/30

Payment terms indicating that a buyer can take a 2% discount if the bill is paid within 10 days, with the net amount due in 30 days.

Net Method

An accounting technique where discounts for early payment are assumed to be taken, reducing the amount recorded as accounts receivable.