One Could Temporarily Protect Profits on a Highly Diversified Portfolio

question 65

Multiple Choice

One could temporarily protect profits on a highly diversified portfolio of large company stocks by

• A) selling S&P 500 Index put options.
• B) buying S&P 500 Index put options.
• C) buying S&P 500 Index call options.
• D) selling S&P 500 Index call options.

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Definitions:

Price Level

An index that measures the average of the prices of goods and services in an economy, indicating the cost of living or inflation.

Purchasing Power

The value of currency expressed in terms of the amount of goods or services that one unit of money can buy.

Deflation

A decrease in the general price level of goods and services, often associated with a reduction in the supply of money or credit.

Annual Interest Rate

The percentage of interest that is charged or earned on an investment or loan on an annual basis.