Financial Management - Study Mode

[#756] According to put call parity relationship, a call option minus put option in addition with present value of exercise is equal to
Correct Answer

(D) stock

Explanation

Solution: According to put call parity relationship, a call option minus put option in addition with present value of exercise is equal to stock. Put-call parity is a principle that defines the relationship between the price of European put options and European call options of the same class, that is, with the same underlying asset, strike price, and expiration date.

[#757] Current value of stock included in portfolio is subtracted from current option price to calculate
Correct Answer

(B) present value of portfolio

Explanation

Solution: Current value of stock included in portfolio is subtracted from current option price to calculate present value of portfolio. Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.

[#758] In financial planning, most high option price will lead to
Correct Answer

(A) longer option period

Explanation

Solution: In financial planning, most high option price will lead to longer option period. option period is a time frame or period of time, which is valid for an option to be exercised before or on the expiration date. On the expiration date, the investor no longer has a choice but has to exercise the option.

[#759] Current option is Rs 700 and current value of stock in portfolio is Rs 1400 then present value of portfolio will be
Correct Answer

(C) Rs 700.00

Explanation

Solution: Present value of portfolio = Current value of stock - Current option = Rs. 1400 - Rs. 700 = Rs. 700.

[#760] Present value of portfolio is Rs 500 and current option price is Rs 1200 then value of stock included in portfolio will be
Correct Answer

(A) Rs 1,700.00

Explanation

Solution: Value of stock included in portfolio = Current option price + Present value of portfolio = Rs. 1200 + Rs. 500 = Rs. 1700.