The Current Stock Price of Alcoco Is $70, and the Stock

question 29

Multiple Choice

The current stock price of Alcoco is $70, and the stock does not pay dividends. The instantaneous risk-free rate of return is 6%. The instantaneous standard deviation of Alcoco's stock is 40%. You want to purchase 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:

Mackintosh's Attentional

A theory explaining how the predictability of a stimulus influences its attentional control in associative learning.

Rescorla-Wagner

A model of conditioning that emphasizes the importance of the strength of the association between the conditioned and unconditioned stimulus.

CS Preexposure

A phenomenon where exposure to the conditioned stimulus before pairing it with the unconditioned stimulus can reduce the effectiveness of conditioning.

Sometimes-Opponent-Process Theory

A theory suggesting that emotional reactions to a stimulus are followed by opposite emotional reactions under certain conditions.