Determine which statement about zero cost purchased collars is FALSE (A) A zero width, zero cost collar can be created by setting both the put and call strike prices at the forward price (B) There are an infinite number of zero cost collars (C) The put option can be at the money (D) The call option can be at the money (E) The strike price on the put option must be at or below the forward price Option price C(K) K K FO T K2 K22 P(K) K FIGURE 3 3 4 Illustration of the construction of two different zero cost collars a K K zero cost collar and a K K zero cost collar

Question: Determine which statement about zero-cost purchased collars is FALSE. (A) A zero-width, zero-cost collar can be created by setting both the put and call strike

Determine which statement about zero-cost purchased collars is FALSE.

(A) A zero-width, zero-cost collar can be created by setting both the put and call strike prices at the forward price.

(B) There are an infinite number of zero-cost collars.

(D) The call option can be at-the-money.

(E) The strike price on the put option must be at or below the forward price.

Option price C(K) K K FO.T K2 K22 P(K) K FIGURE 3.3.4 Illustration of the construction of two different

Option price C(K) K K FO.T K2 K22 P(K) K FIGURE 3.3.4 Illustration of the construction of two different zero-cost collars: a K-K zero-cost collar and a K-K zero-cost collar.

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