Financial Management - Study Mode
[#1141] First step in binomial approach of option pricing is to
Correct Answer
(A) define ending price of stock
Explanation
Solution: First step in binomial approach of option pricing is to define ending price of stock. valuation method developed in 1979. The binomial option pricing model uses an iterative procedure, allowing for the specification of nodes, or points in time, during the time span between the valuation date and the option's expiration date.
[#1142] Present value of portfolio Rs 850 and current option price Rs 1620 then value of stock included in portfolio would be
Correct Answer
(C) Rs 770.00
Explanation
Solution: Stock included in portfolio = Current option price- Present value of portfolio = Rs. 1620 - Rs. 850 = Rs. 770.
[#1143] Beta reflects stock risk for investors which is usually
Correct Answer
(A) individual
Explanation
Solution: Beta reflects stock risk for investors which is usually individual. The beta of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors.
[#1144] For any or lower degree of risk, highest or any expected return are concepts use in
Correct Answer
(D) efficient portfolios
Explanation
Solution: For any or lower degree of risk, highest or any expected return are concepts use in efficient portfolios. An efficient portfolio, also known as an 'optimal portfolio', is one that provides that best expected return on a given level of risk, or alternatively, the minimum risk for a given expected return.
[#1145] An unsystematic risk which can be eliminated but market risk is the
Correct Answer
(B) remaining risk
Explanation
Solution: An unsystematic risk which can be eliminated but market risk is the An unsystematic risk which can be eliminated but market risk is the remaining risk. Unsystematic risk is the risk that is inherent in a specific company or industry. By investing in a range of companies and industries, unsystematic risk can be drastically reduced through diversification.