Reference no: EM132057405
You hold an option with a strike price of $40 on Security ABC. On the expiry date of the option, Security A is selling for $45. Which of the following is correct?
A. If this is a put option, you make nothing.
B. If this is a call option, you make nothing.
C. If this is a put option, you make a net gain of $45.
D. If this is a call option, you make a net gain of $45.
As a general rule about risk aversion and investment choices, which is most accurate?
A. Investors in European countries ("Continental") tend to be more risk averse and therefore are more likely to invest in bonds, whereas investors in Anglo-Saxon countries (like the U.S. and Great Britain) tend to be more interested in equity investments.
B. Investors in European countries ("Continental") tend to be less risk averse and therefore are more likely to invest in equity (stock), whereas investors in Anglo-Saxon countries (like the U.S. and Great Britain) tend to be more risk averse and therefore are more interested in investing in bonds and other debt instruments.
C. Investors in European countries ("Continental") and in Anglo-Saxon countries (like the U.S. and Great Britain) are quite similar in that they are all very risk averse and therefore are both much more likely to invest in debt instruments (like bonds) than equity (like common stock).
D. Investors in European countries ("Continental") and in Anglo-Saxon countries (like the U.S. and Great Britain) are quite similar in that they are not at all averse to risk and therefore are all much more likely to invest in equity (like common stock) than in debt instruments (like bonds).
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