Question 11 1 points Save Answer The theory of irrelevance of expected stock returns states that 1 While computing option price in terms of the price of the underlying asset, probabilities of up and down stock price movement is irrelevant in real world Expected returns on the underlying stock in the real world is irrelevant 2. 3 Both 1 & 2 None of above MacBook Air 7 % 5 6 0 A O { 3 Y T 70 E Co Q C H F S D ( 1. A If put-call parity exists, following is the truest choice about Put-Call Parity: 1. An arbitrage opportunity exists. 2. An arbitrage opportunity does not exist. 3. An arbitrageur can earn a risk-less profit by using a useful trading strategy. 4. Both 1 & 3. L A Moving to another question will save this response. MacBook Air DOO 24 25 26 27 20 JI 32 estion 13 If put-call parity doesn't exist, following is the truest choice about Put-Call Parity: O 1. Put-call parity relation can be used to obtain the value of put(call) from the value of call (put). An arbitrage opportunity does not exist. 2. 3 An arbitrageur cannot earn a risk-less profit by using a useful trading strategy. 4. None of the above. > A Moving to another question will save this response. MacBook Air Question 14 The value of delta 1. Varies from node to node 2. Does not vary from node to node 3. Remains fixed on all nodes 4. None of above Moving to another question will save this response. MacBook Air 24 25 26 27 28 29 30 32 Question 15 1 points Save Answer An investor is computing option price on HTML, a hypothetical company, stock to construct a portfolio of options and stocks. If the investor is following Black & Scholes model in computing option price on the stock of HTML, and his calculations do not allow him to include 2 options and 0.75 stocks in his optimal portfolio, should he believe in that 1. Yes, because Black and Scholes assumes that securities are perfectly divisible. 2. No, because Black and Scholes assumes perfectly divisibility of a security. 3. Indifferent 4. None of above MacBook Air % 5 & 7 0 4 { 0 Y 20 T W E Cow E I HT K C* D S >> 1) s