Which of the Following Statements Is False

question 17

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.

---

Definitions:

Steepest Decline

describes the fastest decrease or most significant drop in a value or quantity over a specific period.

Peer Affiliation

The process of forming connections and relationships with individuals who are of similar age or have similar interests, often critical during adolescence.

Academic Achievement

The extent to which a student, teacher, or institution has achieved their short or long-term educational goals, commonly measured by standardized tests or grades.

High School

A phase of secondary education that follows middle school and prepares students for higher education or the workforce, usually encompassing grades 9 through 12 in the United States.