Question 11 Suppose you do not own a share. How would you use options to insure against a fall in the value of a share?
Posted: Mon Mar 21, 2022 4:36 pm
- Question 11 Suppose You Do Not Own A Share How Would You Use Options To Insure Against A Fall In The Value Of A Share 1 (82.26 KiB) Viewed 47 times
- Question 11 Suppose You Do Not Own A Share How Would You Use Options To Insure Against A Fall In The Value Of A Share 2 (52.96 KiB) Viewed 47 times
Question 11 Suppose you do not own a share. How would you use options to insure against a fall in the value of a share? A. Buy a call and lend at the risk-free B. Buy a share and a put C. Buy a put and a call D. Buy a call and borrow at risk-free Question 12 Jo Cox decides to check whether Fred, the nerdy banker, was correct in claiming that Geothermal's cost of equity is 14%. She estimates Geothermal's beta at 1.20. The risk-free interest rate is 6%, and the long-run average market risk premium is 7.6%. What is the expected rate of return on Geothermal's common stock, assuming of course that the CAPM is true? A. 5.88% B. 15.12% C. 7.84% D. 3.65%
Question 14 Comment on the validity of the following statements, in relation to the Efficient Market Hypothesis. Statement 1: An inefficient market is one in which the value of securities is not always an accurate reflection of the available information. Statement 2: In a semi-strong form market the share price incorporates all past information and all publicly available information. Statement 1 Statement 2 A. True True B. True False C. False True