The Current Price of a Non-Dividend-Paying Stock Is $40

question 7

Multiple Choice

The current price of a non-dividend-paying stock is $40.Over the next year it is expected to rise to $42 or fall to $37.An investor buys one-year put options with a strike price of $41.Which of the following is necessary to hedge the position?

• A) Buy 0.2 shares for each option purchased
• B) Sell 0.2 shares for each option purchased
• C) Buy 0.8 shares for each option purchased
• D) Sell 0.8 shares for each option purchased

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Definitions:

Sarcomeres

The basic contractile units of muscle fiber, responsible for muscle contraction.

Anaerobic Respiration

A type of respiration that occurs without the presence of oxygen, using compounds other than oxygen to react with glucose to produce energy.

Aerobic Respiration

A metabolic process that uses oxygen to generate ATP by breaking down glucose and other nutrients; it occurs in the mitochondria.

ATP

Adenosine triphosphate, commonly referred to as ATP, is vital for transferring energy in cells to power metabolic functions.