Financial Management - Study Mode

[#546] Current value of portfolio is Rs 550 and to cover an obligation of call option is Rs 200 then value of stock would be
Correct Answer

(C) Rs 750.00

Explanation

Solution: Value of Stock = Current value of portfolio + Call option obligation = Rs. 550 + Rs. 200 = Rs. 750.

[#547] According to Black Scholes model, purchaser can borrow fraction of security at risk free interest rate which is
Correct Answer

(A) short term

Explanation

Solution: According to Black Scholes model, purchaser can borrow fraction of security at risk free interest rate which is short term. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables such as volatility, type of option, underlying stock price, time, strike price, and risk-free rate.

[#548] Type of option which cannot be exercised before an expiry date which is classified as
Correct Answer

(A) European option

Explanation

Solution: Type of option which cannot be exercised before an expiry date which is classified as European option. A European option is a type of put or call option that can be exercised only on its expiration date.

[#549] Input call parity relationship, put option minus call option in addition with stock is equal to
Correct Answer

(A) exercise price present value

Explanation

Solution: Input call parity relationship, put option minus call option in addition with stock is equal to exercise price present value. The exercise price is the price at which an underlying security can be purchased or sold when trading a call or put option, respectively.

[#550] Current option is Rs 800 and current value of stock in portfolio is Rs 1900 then present value of portfolio would be
Correct Answer

(C) Rs 1,100.00

Explanation

Solution: Current value of portfolio = Value of stock - Call option = Rs. 1900 - Rs. 800 = Rs. 1100.