Question
Question 34 Option Valuation: Option values may be viewed as the sum of intrinsic value plus time value. The value of a call option increases
Question 34
Option Valuation: Option values may be viewed as the sum of intrinsic value plus time value.
The value of a call option increases if the stock price increases, the exercise price (or strike price)
decreases, the volatility increases, the time to expiration increases, the risk free interest rate
increases, and the dividend payment decreases.
True
False
Question 35
Sector Rotation (SR): One means analysts think about the relationship between industry analysis
and the business cycle is the notion of SR. The idea is to shift the portfolio more heavily into
industry or sector groups that are expected to outperform based on ones assessment of the state
of the business cycle. For instance, if one were anticipating an economic expansion, one would
focus attention on the consumer discretionary, materials, industrials, and energy sectors.
True
False
Question 36
Defined Contribution (DC) vs. Defined Benefit (DB). The two types of pension plans are DC and
DB, the later where the contributions made on behalf of the employees by the firm specifies the
retirement benefits to which the employee is entitled. The benefit formula typically takes into
account years of service for the employer and level of wages. In DC plans, the investment risk is
transferred to the employee.
True
False
Question 37
J Curves. J curves are generally associated with venture capital investments and indicate the
anticipated negative return (or cash flows) early on in its life cycle.
True
False
Question 38
Value Proposition: The consulting model value proposition suggests that a stock price will be
higher the larger the expected dividend per share (or free cash flow), the higher the market
capitalization rate (or risk), and the higher the expected growth rate of dividends (or free cash
flow).
True
False
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started