Suppose an Investor Buys One Share of Stock and a Put

question 48

Multiple Choice

Suppose an investor buys one share of stock and a put option on the stock. What will be the value of her investment on the final exercise date if the stock price is below the exercise price? (Ignore transaction costs.)

• A)The value of two shares of stock.
• B)The value of one share of stock plus the exercise price.
• C)The exercise price.
• D)The value of one share of stock minus the exercise price.

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Definitions:

Decay

The gradual deterioration or loss of effectiveness, quality, or functioning over time.

Forgetting

The loss of ability to recall or recognize something that was previously known, a common process in memory function.

Von Restorff Effect

A psychological phenomenon where noticeably different items are more likely to be remembered than common ones.

Recall

The ability to remember previously experienced events or information, often measured in psychological tests or assessments.