The Maximum Gain (Ignoring Commissions and Taxes)from Buying an At-The-Money

question 35

True/False

The maximum gain (ignoring commissions and taxes)from buying an at-the-money bond put option is the bond price at time of option purchase less the put premium. The maximum loss is the put premium.

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Definitions:

Price-Earnings Ratio

A valuation metric for stocks, calculated by dividing the market price per share by the earnings per share, indicating how much investors are willing to pay per dollar of earnings.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the owners' equity.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, as stated by the issuing company.

Net Income

The amount of profit left after all operating expenses, interest, taxes, and dividends have been deducted from total revenue.