Financial Management - Study Mode

[#176] Present value of portfolio is Rs 900 and current value of stock in portfolio is Rs 1500 then current option price would be
Correct Answer

(D) Rs 600.00

Explanation

Solution: Current option price = Current value of stock - Present value of portfolio = Rs. 1500 - Rs. 900 = Rs. 600.

[#177] Stock option is considered more valuable in situation when stock have
Correct Answer

(D) highly volatile

Explanation

Solution: Stock option is considered more valuable in situation when stock have highly volatile. A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date.

[#178] Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as
Correct Answer

(D) binomial approach

Explanation

Solution: Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as binomial approach. The binomial option pricing model is an options 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.

[#179] An option which can be exercised any desired time before an expiry date is classified as
Correct Answer

(D) American option

Explanation

Solution: An option which can be exercised any desired time before an expiry date is classified as American option. An American option is a put option or call option that can be exercised at any time on or before its expiration date.

[#180] In financial planning, a higher strike price leads to call option
Correct Answer

(C) price is lower

Explanation

Solution: In financial planning, a higher strike price leads to call option price is lower. Financial Planning is the process of estimating the capital required and determining it's competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.