Suppose an Investor Buys One Share of Stock and a Put

question 38

Multiple Choice

Suppose an investor buys one share of stock and a put option on the stock and simultaneously sells a call option on the stock with the same exercise price. What will be the value of his investment on the final exercise date?

• A)Above the exercise price if the stock price rises and below the exercise price if it falls
• B)Equal to the exercise price regardless of the stock price
• C)Equal to zero regardless of the stock price
• D)Below the exercise price if the stock price rises and above if it falls

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Definitions:

Contract Clause

A provision included in a contract that specifies the obligations, rights, or restrictions for the parties involved.

Restitution

The act of restoring or returning something to its rightful owner or compensating for loss, damage, or injury caused.

Architect's Breach

A violation or failure by an architect to fulfill contractual duties or meet professional standards, resulting in harm or loss.

Immediately Hire

The urgent employment of an individual or personnel without typical delays.