Which of the Following Statements Is FALSE

question 40

Multiple Choice

Which of the following statements is FALSE?

• A)The option delta,Δ,has a natural interpretation: It is the change in the price of the stock given a $1 change in the price of the option.
• B)Because a leveraged position in a stock is riskier than the stock itself,this implies that call options on a positive beta stock are more risky than the underlying stock and therefore have higher returns and higher betas.
• C)Only one parameter input for the Black-Scholes formula,the volatility of the stock price,is not observable directly.
• D)Because a stock's volatility is much easier to measure (and forecast)than its expected return,the Black-Scholes formula can be very precise.

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Definitions:

Ethanol

A two-carbon alcohol (C2H5OH) commonly used as a solvent, fuel, and in alcoholic beverages.

Methylhexene

An alkene with a methyl group and a hexene (six carbon linear chain with a double bond) component in its structure.

Elimination

A type of chemical reaction where elements are removed from a compound, resulting in the formation of a double or triple bond.

Substitution

A chemical reaction where one atom or group of atoms in a molecule is replaced with a different atom or group of atoms.