If the underling is a liability rather than an asset, then the option premium should become negative. True False

Q: Is it true that current liabilities are riskier than long-term liabilities?

A: Liabilities: Liabilities are debt and obligations of a business. These are the claims against the…

Q: Market risk cannot be eliminated. OA. True OB. False

A: The financial market can be defined as the market place which includes the trading of securities and…

Q: hy not?

A: Introduction : A forward contract can be seen as a private, customizable contract which is exchanged…

Q: ue/ False There is a possibility of unlimited loss to put option buye

A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…

Q: How does interest rate risk differ from reinvestment rate risk? Why is the difference important?

A: Interest Rate Risk and Re investment Risk Interest rate risk results from the possibility that…

Q: The seller of a put option is not necessarily the seller of the underlying asset. True False

A: The options can be sold even though the underlying assets are not held by the option sellers.

Q: Choose which sentance is false.       A. When you own a call​ option, you have the right to buy the…

A: The option contracts are the derivative financial instruments that can be classified as the call…

Q: The seller of a put option is not necessarily the seller of the underlying asset. Select one: O True…

A: Put options are vital financial derivatives which provide the right to sell the asset at the…

Q: What if the lessee is unaware of the lessor’s implicit rate?

A: Lease:   Lease is a contractual agreement whereby the right to use an asset for a particular period…

Q: An investment computed at compound interest is always a better option than an investment computed at…

A: Simple interest is based on the principal amount of an investment.   Compound interest is based on…

Q: What is the fair value option? Briefly describe the controversyof applying the fair value option to…

A: Meaning of fair value option:

Q: Value forward agreements normally have adjustments dependent on the price of the equity, worth of…

A: The value of the forward agreement is an agreement that has already specified its assets to be…

Q: If investors speculate in derivative contracts rather than in the underlying asset, they will…

A: A derivative contract is a contract in which the value of the contract directly depends on the…

Q: risk-adjusted discount rate has

A: In financial terms, risk can be defined as the possibility that the real profits from an outcome or…

Q: If the underling is a liability rather than an asset, then the strike price of the option should be…

A: The option is a financial security since a buyer can purchase the right rather than the obligation…

Q: Market risk ________.   a. is equal to the rate of return generated by a risk-free asset b.…

A: By simple diversification the total risk can be reduced but can not be totally eliminated. The…

Q: Fundamental security underlying the valuation need to be priced correctly for the derivative…

A: Introduction : Derivatives refers to the contractual financial obligations the value of which is…

Q: no-arbitrage price of Security C?

A: Arbitrage opportunity exist when there is mispricing in value of security but if value is correct…

Q: Is this True or False? A Put option's premium, the intrinsic value can be the following; either…

A: Intrinsic value of put option is maximum of zero or difference between strike price and market…

Q: The value of a derivative does not depend on the value of its underlying asset. True or False

A: False.The value of a derivative is directly influenced by the value and behavior of its underlying…

Q: The potential loss incurred from purchasing a call option is finite, but the potential loss to the…

A: Let's figure out the payoff to the seller  or writer of the call option at the time of expiration of…

Q: ) define a protective put.     l) demonstrate an understanding of the position of buying a…

A: Put option provides the right to its holder to sell the underlying stock at the prespecified price,…

Q: Which derivative does not reduce financial risk? a. options b. swaps c. futures d.forwards e.…

A: Financial derivative is referred as the financial instrument, which can link to the particular…

Q: ich of the following inputs is not required to price option using the Black‐Scholes model?  a) the…

A: Introduction: The Black-Scholes model is a differential equation used in financial theory. The…

Q: The distinction between “pure risk” and “speculative risk” is important because only pure risks are…

A: “Fundamental risks” are those risks which affect a large segment of companies. But the risks which…

Q: If underlying is non-dividend paying, then the time value of an American call option is positive,…

A: Call option provides its holder to purchase shares at the pre-specified price known as strike price…

Q: For balance sheet purposes, can the fair value of a derivative in a loss position be netted against…

A: Financial accounting standards board (FASB): This is the organization which creates, develops, and…

Q: Which one of the following statements is correct? Group of answer choices   The lower the average…

A: Risk premium: It is the difference between the expected returns and risk-free market rates. Correct…

Q: Can default risks be adequately covered by the choice of a suitably high interest rate compared to…

A: Yes, Default risks can be adequately covered by choice of high interest rates in comparison to the…

Q: AAR is biased in favour of liquid investments. Select one: True O False

A: False.Explanation:Absolute Assignment Ratio (AAR) is a financial metric that gauges the performance…

Q: If an investor has unique needs and does not care about liquidity, which contract is right for them:…

A: future contract is the contract which gives the obligation to the holder to buy or sell the…