Which of the Following Statements Is FALSE

question 19

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:

Alternative Hypothesis

In hypothesis testing, it is the hypothesis that suggests there is an actual effect or relationship present in the population.

P-value

The chance of encountering outcomes in a test that are as extreme or exceed the observed findings, given that the null hypothesis holds.

Test Statistic

A value calculated from sample data that is used in hypothesis testing to decide whether to reject the null hypothesis.

P-values

Measures that help determine the significance of results obtained in statistical hypothesis testing, indicating the probability of observing results if the null hypothesis were true.