Which One of the Following Will Provide You with the Same

question 53

Multiple Choice

Which one of the following will provide you with the same value that you would have if you just purchased BAT stock?

• A)sell a put option on BAT stock and invest at the risk-free rate of return
• B)buy both a call option and a put option on BAT stock and also lend out funds at the risk-free rate
• C)sell a put and buy a call on BAT stock as well as invest at the risk-free rate of return
• D)lend out funds at the risk-free rate of return and sell a put option on BAT stock
• E)borrow funds at the risk-free rate of return and invest the proceeds in equivalent amounts of put and call options on BAT stock

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Definitions:

Financial Leverage

The use of borrowed funds to amplify return on investment.

Current Assets

Assets expected to be converted into cash, sold, or consumed within a year, including cash, marketable securities, receivables, and inventory.

Capital Intensity Ratio

The Capital Intensity Ratio is a financial metric that measures the amount of investment in capital assets required to generate one dollar of revenue.

Total Asset Turnover Ratio

A financial metric used to assess a company's efficiency in using its assets to generate sales or revenue.