The Current Share Price of Alcoa Is $70 and the Share

question 17

Multiple Choice

The current share price of Alcoa is $70 and the share does not pay dividends. The instantaneous risk free rate of return is 6%. The instantaneous standard deviation of Alcoa's shares is 40%. A put option on this share with an exercise price of $75 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold ________ shares of stock per 100 put options to hedge your risk.

• A)30
• B)34
• C)69
• D)74

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Definitions:

Partnership Control

Partnership control refers to the governance or directive influence exercised by partners in a partnership, affecting decision-making and operations.

Partnership Share

The portion of ownership interest that a partner has in a partnership, often determining the share of profits and losses and the extent of liability.

Liquidated

The process of converting assets into cash or liquid assets, often in the context of dissolving a company or settling debts.

Existing Partnership

An ongoing business relationship between two or more persons who cooperate to conduct business activities for profit.