What Portfolio Position in Stock and T-Bills Will Ensure You

question 78

Multiple Choice

What portfolio position in stock and T-Bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X = $50?

• A) ½ share of stock and $25 in bills
• B) 1 share of stock and $50 in bills
• C) ½ share of stock and $26.19 in bills
• D) 1 share of stock and $25 in bills

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Definitions:

Inventory

The raw materials, work-in-process products, and finished goods that a company holds for the purpose of sale in the near future.

Marketable Securities

Financial instruments that can be easily converted into cash, such as stocks, bonds, or treasury bills.

Operating Activities

Activities that relate directly to the primary business operations of a company, such as selling products or providing services.

Financing Activities

Transactions that involve raising capital for the business and repaying investors, such as issuing debt and equity or paying dividends.