Which has more value, (a) a portfolio composed of call options on ten different stocks or (b) a single call option on a portfolio composed of the same ten stocks? Assume the exercise price of (b) is equal to the sum of the exercise prices of the call options in (a) and that the expiration dates are identical. Explain your answer!
Which has more value, (a) a portfolio composed of call options on ten different stocks or (b) a single call option on a portfolio composed of the same ten stocks? Assume the exercise price of (b) is equal to the sum of the exercise prices of the call options in (a) and that the expiration dates are identical. Explain your answer!
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Which has more value, (a) a portfolio composed of call options on ten different stocks or (b) a single call option on a portfolio composed of the same ten stocks? Assume the exercise price of (b) is equal to the sum of the exercise prices of the call options in (a) and that the expiration dates are identical. Explain your answer!
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