Consider a Portfolio Consisting of a Long Call with an Exercise

question 3

Multiple Choice

Consider a portfolio consisting of a long call with an exercise price of X,a short position in a non-dividend paying stock at an initial price of S₀,and the purchase of riskless bonds with a face value of X and maturing when the call expires.What should such a portfolio be worth?

• A)C + P - X(1 + r)^-T
• B)C - S₀
• C)P - X
• D)P + S₀ - X(1 + r)^-T
• E)none of the above

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