If You Expect the Price of a Stock to Decrease

question 24

Multiple Choice

If you expect the price of a stock to decrease and its volatility to increase, then the most appropriate strategy to use is a

• A) Long put
• B) Short put
• C) Long Call
• D) Short call

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Definitions:

Debt Ratio

An indicator measuring a corporation's use of borrowing, obtained by dividing the sum of all liabilities by the sum of all assets.

Debt Financing

The means of raising capital through the sale of bonds, bills, or notes to individuals or institutions, in return for lending money to the borrowing entity.

Net Operating Income

A measure of a company's profitability from its regular business operations, excluding taxes and interest.

Interest Rate

Interest rate is the percentage of the principal amount charged by lenders for the use of their money or paid by banks for keeping money in an account.