Financial Management - Study Mode

[#926] Current value of stock in portfolio with current option price Rs 20 is Rs 50, then present value of portfolio would be
Correct Answer

(A) Rs 30.00

Explanation

Solution: Present value of portfolio = Current value of portfolio - Current option price = Rs. 50 - Rs. 20 = Rs. 30.

[#927] Situation in financial options in which strike price is less than current price of stock is classified as
Correct Answer

(A) in-the-money

Explanation

Solution: Situation in financial options in which strike price is less than current price of stock is classified as in-the-money. A call option is in the money (ITM) if the market price is above the strike price. A put option is in the money if the market price is below the strike price.

[#928] 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).

[#929] 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.

[#930] 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.