Identify the incorrect statement below about Call premiums. A. The higher the interest rate the cheaper the Call premium. B. The later the time to expiry the higher the Call premium. C. The higher the exercise price the cheaper the Call premium. D. The lower the share price the cheaper the Call premium.
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- k) define a protective put. l) demonstrate an understanding of the position of buying a protective put by identifying the breakeven stock price, the maximum profit, and the maximum loss. m) discuss the similarities between a protective put and an insurance policy. n) discuss the similarities between the exercise price in a protective put and the deductible in an insurance policy. o) demonstrate an understanding of the constructions of a synthetic put by identifying the breakeven stock price, the maximum profit, and the maximum loss.b) Explain the reasons why do investors prefer high or low pay out ratio?Which of the following is incorrect regarding margin trading? O a. The relationship between security prices and the new margin is positive. O b. It can be applied to bond trading. O c. An account is restricted when the equity is less than the maintenance margin. O d. The lower the amount of equity, the greater the loss when prices fall.
- Which one of the following statements is correct? Group of answer choices The lower the average return, the greater the risk premium. The greater the volatility of returns, the greater the risk premium. The lower the volatility of returns, the greater the risk premium. The risk premium is not affected by the volatility of returns. The risk premium is unrelated to the average rate of return.Interest prepaid by the buyer, which may be used to reduce the stated interest rate the lender charges, are known as ▼ margins. points. payment caps. variable investments.Do solve all parts A. What risk premium do you use? Why? B. Why is the geometric mean lower than the arithmetic mean for both bonds and bills? C. If you had to use a risk premium with the longer periods, what biases will the investor have?
- 1. An estimation by marginal investor, a higher expected return is earned on A. more risky securities B. less risky securities C. less premium D. high premiumInvestors require a _____ return as compensation for taking ____ risk. A) higher, margin B) higher, more C) higher, convexity D) lower, margin E) lower, more F) lower, convexityWhat is a “liquidity premium?” When do investors increase their attention to such a premium?
- The return payable on equity is called Select one: a. Brokerage b. Interest c. None of the options d. Commission e. DiscountIn general, would a falling rate of market interest cause the price of an MPT security to increase or decrease? Would the increase or decrease be greater if the security was issued at a discount? Would an increase in prepayment be likely or unlikely? Describe with an example.INTEREST RATE RISK In the context of the repricing gap model, what is the spread effect? How does it affect the change in net interest income?