The Current Stock Price of Alcoa Is $70 and the Stock

question 66

Multiple Choice

The current stock price of Alcoa is $70 and the stock does not pay dividends.The instantaneous risk free rate of return is 6%.The instantaneous standard deviation of Alcoa's stock is 40%.A put option on this stock with an exercise price of $75 and an expiration date 30 days from now.According to the Black-Scholes OPM,you should hold __________ shares of stock per 100 put options to hedge your risk.

• A) 30
• B) 34
• C) 69
• D) 74

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Definitions:

Young Salesman

A term referring to a relatively inexperienced individual engaged in selling goods or services.

Economic Perspective

Viewing and analyzing economic phenomena in terms of costs, benefits, incentives, and the allocation of scarce resources.

Class Value

A concept reflecting the assumed worth or importance of a particular class in societal, economic, or educational settings.

Unemployment

The condition of being jobless despite actively looking for work, typically measured as a percentage of the labor force.