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Ch 2 Problem set

# Ch 2 Problem set - C sell the option in the open market...

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Chapter 2 Asset Classes and Financial Investments Ch 2 Problem set 2 1.The Dow Jones Industrial Average and the New York Stock Exchange Index have unique characteristics. Discuss how these indices are calculated and any problems/advantages associated with the specific indices. 2.A call option allows the buyer to A) sell the underlying asset at the exercise price on or before the expiration date. B) buy the underlying asset at the exercise price on or before the expiration date. C) sell the option in the open market prior to expiration. D) A and C. E) B and C. 3. A put option allows the holder to A) buy the underlying asset at the striking price on or before the expiration date. B) sell the underlying asset at the striking price on or before the expiration date.
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Unformatted text preview: C) sell the option in the open market prior to expiration. D) B and C. E) A and C. 4.Based on the information given, for a price-weighted index of the three stocks calculate: A) the rate of return for the first period (t=0 to t=1). B) the value of the divisor in the second period (t=2). Assume that Stock A had a 2-1 split during this period. C) the rate of return for the second period (t=1 to t=2). 5. Based on the information given for the three stocks, calculate the first-period rates of return (from t=0 to t=1) on A) a market-value-weighted index. B) an equally-weighted index. C) a geometric index. 1...
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