A Call Option Has an Exercise Price of $100

question 73

Multiple Choice

A call option has an exercise price of $100. At the exercise date, the stock price could be either $50 or $150. Which investment strategy provides the same payoff as the stock?

• A)Lend PV of $50 and buy two calls.
• B)Lend PV of $50 and sell two calls.
• C)Borrow $50 and buy two calls.
• D)Borrow $50 and sell two calls.

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Definitions:

Particular Way

A specific manner or method of doing something.

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Researchers who study patterns of thoughts, feelings, and behavior that make a person unique.

Individual Differences

Variations among individuals in their psychological traits, such as abilities, motivations, and personality characteristics.

Consistency

Refers to the uniformity or stability in behaviour, thoughts, or emotions over time and across situations.