To Compute the Value of a Put Using the Black-Scholes

question 20

Multiple Choice

To compute the value of a put using the Black-Scholes option pricing model,you:

• A)first have to apply the put-call parity relationship.
• B)first have to compute the value of the put as if it is a call.
• C)compute the value of an equivalent call and then subtract that value from one.
• D)compute the value of an equivalent call and then subtract that value from the market price of the share.
• E)compute the value of an equivalent call and then multiply that value by e^-RT.

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Definitions:

Accounting Principles

Fundamental guidelines or rules that underpin the process of accounting, including concepts like the matching principle, revenue recognition, and historical cost.

Short-term Creditors

Lenders or entities from whom a company has borrowed money or resources that are to be repaid within one year.

Liquidity

The ability of an asset to be quickly converted into cash or an entity's capacity to meet its immediate and short-term obligations.

Unusual Items

Non-recurring or uncommon transactions that are outside the usual business operation, which might distort the financial statements if not separately disclosed.