1. Firms regularly use the following to reduce risk:

1. I) currency options
2. II) interest-rate options
3. III) commodity options

Multiple Choice

A. II only

B. I, II, and III

C. I only

D. III only

2. A call option has an exercise price of $150. At the option expiration date, the stock price could be either $100 or $200. Which investment would combine to give the same payoff as the stock?

Multiple Choice

A. Borrow $100 and sell two calls.

B. Borrow $100 and buy two calls.

C. Lend PV of $100 and sell two calls.

D. Lend PV of $100 and buy two calls.