The Owner of a Large, Diversified Stock Portfolio Could Hedge

question 88

Multiple Choice

The owner of a large, diversified stock portfolio could hedge against a steep decline in prices by

• A) buying call options on a stock index.
• B) buying put options on a stock index.
• C) selling put options on a stock index.
• D) buying both call and put options with the same expiration date.

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Definitions:

Total Product

The total quantity of output produced by a firm over a given period of time.

Average Product

The output per unit of a particular input, calculated by dividing total output by the quantity of inputs.

Labor

Human effort, either physical or mental, used in the production of goods and services.

Average Product

The output per unit of input, calculated by dividing the total output by the number of units of the input.