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Suppose You Feel a Certain Stock Will Decline in Value

question 132

Multiple Choice

Suppose you feel a certain stock will decline in value. Which of the following option strategies will create a profit for you?
I. Buy a call.
II. Buy a put.
III. Sell a call.
IV. Sell a put.


Definitions:

Interest Income

Interest income is the revenue earned from deposit accounts or investments through the lending of money or the use of capital.

Bond Premium

The amount by which the market price of a bond exceeds its principal amount or face value.

Amortization

The process of gradually writing off the initial cost of an intangible asset over its useful life.

Long-Term Bond

A bond that matures in more than ten years, offering the bondholder a specified interest rate over a long period.

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