Which of the Following Statements Is FALSE

question 45

Multiple Choice

Which of the following statements is FALSE?

• A)Out-of-the-money calls have the highest expected returns and out-of-the-money puts have the lowest expected returns.
• B)The expression SΔ/(SΔ +B)is the ratio of the amount of money in the stock position in the replicating portfolio to the value of the replicating portfolio (or the option price);it is known as the leverage ratio.
• C)The beta of a portfolio is just the weighted average beta of the constituent securities that make up the portfolio.
• D)The magnitude of the leverage ratio for options is usually very small,especially for out-of-the-money options.

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Definitions:

Conservatives

Individuals or political groups that favor retaining traditional social institutions, values, and practices, typically resisting abrupt change.

New Deal

A collection of initiatives, including public works schemes, economic reforms, and regulations implemented by President Franklin D. Roosevelt in the United States throughout the 1930s, designed to aid in recovery from the Great Depression.

Relief Programs

Government initiatives designed to provide support and assistance to individuals and communities in economic hardship.