According to the Put-Call Parity Theorem, the Payoffs Associated with Ownership

question 22

Multiple Choice

According to the put-call parity theorem, the payoffs associated with ownership of a call option can be replicated by ________.

• A)shorting the underlying share, borrowing the present value of the exercise price and writing a put on the same underlying share and with the same exercise price
• B)buying the underlying share, borrowing the present value of the exercise price and buying a put on the same underlying share and with the same exercise price
• C)buying the underlying share, borrowing the present value of the exercise price and writing a put on the same underlying share and with the same exercise price
• D)shorting the underlying share, lending the present value of the exercise price and buying a put on the same underlying share and with the same exercise price

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Definitions:

Asset Turnover

A measure of how efficiently a company uses its assets to generate sales; computed by dividing net sales by average total assets.

Price-earnings Ratio

A valuation metric for stocks, calculated by dividing the market price per share by the earnings per share.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits.

Net Income

The profit of a company after all expenses, taxes, and costs have been deducted from total revenue.