Financial Management - Study Mode

[#1026] Input call parity relationship, present value of exercise price is added to call option which is equal to
Correct Answer

(A) put option stock

Explanation

Solution: Input call parity relationship, present value of exercise price is added to call option which is equal to put option stock. A put or put option is a stock market device which gives the owner the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).

[#1027] An option that gives investors right to sell a stock at predefined price is classified as
Correct Answer

(A) put option

Explanation

Solution: An option that gives investors right to sell a stock at predefined price is classified as put option. A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.

[#1028] Value of stock is Rs 250 and call option obligation is Rs 100 then current value of portfolio would be
Correct Answer

(B) Rs 150.00

Explanation

Solution: Current value of portfolio = Value of stock - Call option = Rs. 250 - Rs. 100 = Rs. 150.

[#1029] Difference between bond's yield and any other security yield having same maturities is considered as
Correct Answer

(B) bond spread

Explanation

Solution: Difference between bond's yield and any other security yield having same maturities is considered as bond spread. The term “bond spreads” or “spreads” refers to the interest rate differential between two bonds.

[#1030] Protective covenant devised in market to reduce event risk and to control debt cost is classified as
Correct Answer

(B) super poison put

Explanation

Solution: Protective covenant devised in market to reduce event risk and to control debt cost is classified as super poison put. Protective covenant. A part of an indenture or loan agreement that limits certain actions a company may take during the term of the loan to protect the lender's interests.