Financial Management - Study Mode

[#336] Capital Budgeting is a part of:
Correct Answer

(A) Investment Decision

[#337] In an option pricing, a rises in risk free rate results in option's value
Correct Answer

(B) slight increases

Explanation

Solution: In an option pricing, a rises in risk free rate results in option's value slightly increases. Option pricing is the amount per share at which an option is traded. Although the option holder is not obligated to exercise the option, the seller must buy or sell the underlying instrument if the option is exercised.

[#338] If current price increases from lower to higher then an
Correct Answer

(B) option value will increase

Explanation

Solution: If current price increases from lower to higher then an option value will increase. The current price, also known as the market value, is the price at which goods are currently being sold in the market.

[#339] In financial planning, formula MAX [current price of stock-strike price, 0] is used to calculate
Correct Answer

(B) exercise value

Explanation

Solution: In financial planning, formula MAX [current price of stock-strike price, 0] is used to calculate exercise value. The exercise value is the value that an option buyer will get from the option on exercising it.

[#340] According to put call parity relationship, call option plus present value of exercise price minus stock is to calculate
Correct Answer

(C) put option

Explanation

Solution: According to put call parity relationship, call option plus present value of exercise price minus stock is to calculate 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.