Which One of the Following Statements Is Correct for an Investor

question 57

Multiple Choice

Which one of the following statements is correct for an investor who has purchased portfolio insurance by owning a stock and buying a put option on that stock?

• A) The investor profits when the stock price declines.
• B) Maximum profitability occurs when the stock price equals the exercise price.
• C) The value of the position can decline no further than the option's exercise price.
• D) The option will certainly be exercised.

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Definitions:

Dominant Style

A prevalent approach or method adopted in behavior, leadership, communication, or fashion that takes precedence over others due to its effectiveness or popularity.

Collaborating Style

A cooperative approach to conflict resolution or project management where parties work together toward a common goal, valuing mutual benefits.

Dynamic

Characterized by constant change, activity, or progress.

Evaluated Favorably

Being assessed or judged in a positive manner, often in the context of performance reviews, project outcomes, or personal achievements.