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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