In Section 21-1 we used a simple one-step model to value two Google options each with an
Question:
a. If the beta of Google stock is 1.15, what is the beta of the call according to the one-step model?
b. What is the beta of the put?
c. Suppose that you were to buy one call and invest the present value of the exercise price in a bank loan. What would be the beta of your portfolio?
d. Suppose instead that you were to buy one share and one put option of Google. What would be the beta of your portfolio now?
e. Your answers to parts (c) and (d) should be the same. Explain.
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Related Book For
Principles of Corporate Finance
ISBN: 978-1259144387
12th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen
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