Suppose You Purchase a Call and Write a Put on the Same

question 54

Multiple Choice

Suppose you purchase a call and write a put on the same stock with the same exercise price and expiration. If prices are at equilibrium, the value of this portfolio is ________.

• A) S₀ − Xe^−rt
• B) S₀ − X
• C) S₀ + Xe^−rt
• D) S₀ + X

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Definitions:

Greed

An intense and selfish desire for something, especially wealth, power, or food.

Dangerous Reactions

Responses to events or substances that could lead to harm or adverse effects.

Dyad

the simplest social group consisting of two people, often used to study interpersonal relationships.

Psychologists

Professionals dedicated to understanding mental processes, behavior, and the underlying dynamics of individuals and groups.