Buying a Call Option, Investing the Present Value of the Exercise

question 40

Multiple Choice

Buying a call option, investing the present value of the exercise price in T-bills, and short-selling the underlying share is the same as

• A)buying a call and a put.
• B)buying a put and a share.
• C)buying a put.
• D)selling a call.

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Definitions:

Financing Cash Flow

Cash flows related to the financing of the company's operations, including debt, equity, and dividend payments.

Stockholders' Equity

The residual assets of a company that belong to shareholders after all liabilities have been subtracted.

Noncurrent Liability

A financial obligation that is not due for settlement within one year of the balance sheet date.