A Payoff Structure Resembling That of a Long Futures Position

question 11

Multiple Choice

A payoff structure resembling that of a long futures position can be created by:

• A)buying a call option and selling a put option,with the same exercise price and premium for both options.
• B)selling a call option and buying a put option,with the same exercise price and premium for both options.
• C)buying a call option and buying a put option,with the same exercise price and premium for both options.
• D)selling a call option and selling a put option,with the same exercise price and premium for both options.

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Definitions:

Semiannual Interest

Interest that is computed and disbursed semi-annually, commonly associated with bonds and loans.

Straight-line Method

An approach to calculate depreciation or amortization by equally dividing the asset's expense over its useful life.

Issue Bonds

The act of a corporation or government borrowing money from investors by selling them bond securities.

Sold For

Refers to the final price at which a product, asset, or service is sold to a buyer in a transaction.