Quiz Ch 20 – T/F Downside Protection through Put Options
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Buying a put option provides investors with downside protection on their stock purchases.
True or false: Buying a put option provides investors with downside protection on their stock purchases.
True or false: Position diagrams and profit diagrams represent a synonymous concept.
True or false: The payoff from purchasing stock, a put option, and lending the present value of the exercise price is equivalent to that of buying a call option.
True or false: The price of a call option rises proportionally with an increase in the exercise price.
True or false: Even if the underlying stock becomes worthless, call options may still hold a positive value at expiration.
True or false: A put option writer faces losses when the stock price falls.
True or false: In European options, the sum of the call option value and the present value of the exercise price equals the sum of the put option value and the share price.
True or false: The price of a call option tends to climb when the underlying stock experiences an upward movement.
True or false: Profit diagrams do NOT account for the time value of money.
True or false: Options written on volatile assets have higher value, assuming other factors remain constant.