You manage your personal investments, which have bonds and options. Answer the following practical investment questions (to
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Question:
You manage your personal investments, which have bonds and options. Answer the following practical investment questions (to see if you can get some usefulness from this class)
A recession hits, and the firm's default risks increase. Will the price of its bonds increase or decrease? First, answer the question then briefly explain.
- Inflation is high, so the central bank decides to increase the interest rate. Will the price of your bonds increase or decrease? First, answer the question then briefly explain.
- You have bought some call options on stock A, which does not pay dividends. Suddenly Yahoo Finance has an article telling you stock A is a great investment. So, you decide to exercise your call options for stock A because you really want the stock. Your friend calls you a fool, "you should have just sold your call options and used the proceeds to buy stock A!". Is your friend right or wrong? First, answer the question then briefly Explain.
- You're selling call options. And your friend tells you the loss from selling call options is unlimited. Is your friend right or wrong? First, answer the question then Briefly Explain.
- You're selling put options. Is the loss from selling put options unlimited or not? First, answer the question then Briefly Explain.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: