To Compute the Value of a Put Using the Black-Scholes

question 58

Multiple Choice

To compute the value of a put using the Black-Scholes option pricing model,you:

• A)first have to apply the put-call parity relationship.
• B)first have to compute the value of the put as if it is a call.
• C)compute the value of an equivalent call and then subtract that value from one.
• D)compute the value of an equivalent call and then subtract that value from the market price of the stock.
• E)compute the value of an equivalent call and then multiply that value by e^-RT.

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Definitions:

Conservation-of-Volume Task

A cognitive development task used in developmental psychology to assess a child's understanding that the quantity of a substance remains unchanged even when its appearance changes.

Decenter

The ability to consider multiple aspects of a situation or problem simultaneously, crucial in the development of logical thinking in children.

Concrete Operations

A stage in Piaget's theory of cognitive development, typically occurring between ages 7 and 12, where children gain the ability to think logically about concrete events.

Classification

The systematic process of organizing or categorizing items, ideas, or information based on shared characteristics or principles.