Which one of the following acts like an insurance policy if the price of a stock you own suddenly decreases in value?

Which one of the following acts like an insurance policy if the price of a stock you own suddenly decreases in value?    A.  sale of a European call option B.  sale of an American put option C.  purchase of a protective put D.  purchase of a protective call E.  either the sale or purchase of a put Refer to section 25.1

12.

Which one of the following can be used to replicate a protective put strategy?    A.  riskless investment and stock purchase B.  stock purchase and call option C.  call option and riskless investment D.  riskless investment E.  call option, stock purchase, and riskless investment Refer to section 25.1

13.

Given the (1) exercise price E, (2) time to maturity T, and (3) European put-call parity, the present value of E plus the value of the call option is equal to the:    A.  current market value of the stock. B.  present value of the stock minus the value of the put. C.  value of the put minus the market value of the stock. D.  value of a risk-free asset. E.  stock value plus the put value. Refer to section 25.1

14.

Which one of the following will provide you with the same value that you would have if you just purchased BAT stock?    A.  sell a put option on BAT stock and invest at the risk-free rate of return B.  buy both a call option and a put option on BAT stock and also lend out funds at the risk-free rate C.  sell a put and buy a call on BAT stock as well as invest at the risk-free rate of return D.  lend out funds at the risk-free rate of return and sell a put option on BAT stock E.  borrow funds at the risk-free rate of return and invest the proceeds in equivalent amounts of put and call options on BAT stock Refer to section 25.1

15.

Under European put-call parity, the present value of the strike price is equivalent to:    A.  the current value of the stock minus the call premium. B.  the market value of the stock plus the put premium. C.  the present value of a government coupon bond with a face value equal to the strike price. D.  a U.S. Treasury bill with a face value equal to the strike price. E.  a risk-free security with a face value equal to the strike price and a coupon rate equal to the risk-free rate of return. Refer to section 25.1