Given an Exercise Price E,time to Maturity T and European

question 18

Multiple Choice

Given an exercise price E,time to maturity T and European put-call parity,the present value of the strike price E plus the call option is equal to:

• A)the current market value of the stock.
• B)the present value of the stock minus a put option.
• C)a put option minus the market value of the share of stock.
• D)the value of a U.S.Treasury bill.
• E)the share of stock plus the put option.

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Definitions:

Du Pont Identity

A formula that breaks down return on equity into three component parts: profit margin, asset turnover, and financial leverage.

Profit Margin

A financial ratio that shows the percentage of revenue that exceeds the cost of goods sold, indicating the efficiency of a company in generating profit.

Operating Profit Margin

A profitability ratio calculated as operating income divided by revenue, indicating the percentage of revenue that is left over after paying for variable costs of production.

Cost of Goods Sold

Expenses directly incurred from the production of a company's sold goods, involving the cost of labor and materials.