Put-Call Parity Says That the Price on a Portfolio of ____

question 51

Multiple Choice

Put-call parity says that the price on a portfolio of ____ must equal the price of a portfolio of ____.

• A) a bond and call option; one share of common stock and one put option.
• B) one share of common stock and a call option; a bond and one put option.
• C) one share of preferred stock and a bond; a call option and one put option
• D) one put option and one share of preferred stock; a bond and one call option

---

Definitions:

Demand Curve

A graphical representation in economics that shows the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at varying price levels.

Homothetic Preferences

A consumer preference structure in which utility functions display constant returns to scale, meaning relative consumption patterns do not change as income levels change.

Substitution Effect

The change in consumption patterns due to a change in relative prices of goods, leading individuals to substitute cheaper goods for more expensive ones.

Compensated Demand Function

A demand function that adjusts for changes in income to show how quantities demanded by consumers change in response to a price change while keeping utility constant.