Quiz Ch 20 – T/F Equivalence of Position and Profit Diagrams
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Position diagrams and profit diagrams represent a synonymous concept.
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: The owner of an American call option has the entitlement to purchase stock at a set strike price within a designated timeframe.
True or false: As an option approaches expiration, its price tends to decrease holding other factors constant.
True or false: Even if the underlying stock becomes worthless, call options may still hold a positive value at expiration.
True or false: Purchasing an in-the-money option is likely to result in a profit most of the time.
True or false: Selling a put option provides the privilege to buy stock at a specified strike price.
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.