Assume That the Current Price of an XYZ Share Is

question 42

Multiple Choice

Assume that the current price of an XYZ share is $4 00 and that the price of a call option on these shares is $0 80 If we know that a 10 c movement in share price will be accompanied in the same direction by a 5c movement in the call price,then an appropriate risk-free hedge will be:

• A)writing five calls for every share held.
• B)writing four calls for every share held.
• C)writing three calls for every share held.
• D)writing two calls for every share held.

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Definitions:

Reverse Auctions

A type of auction in which sellers bid to supply goods or services to a buyer, with the price decreasing in each bid.

Buyer-Initiated

Transactions or actions that are started or requested by the purchaser rather than the seller.

Sequential Bidding

A process in auctions where bids are made one after another in a pre-determined sequence, often leading to increased strategic behavior among bidders.

Alternative Transportation

Refers to modes of transport that serve as options other than personal vehicles, such as public transit, cycling, walking, and carpooling, often emphasized for their environmental benefits.