{"id":42837,"date":"2024-04-15T21:20:50","date_gmt":"2024-04-15T21:20:50","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=42837"},"modified":"2024-04-15T21:20:50","modified_gmt":"2024-04-15T21:20:50","slug":"input-call-parity-relationship-present-value-of-exercise-price-is-added-to-call-option-which-is-equal-to","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/input-call-parity-relationship-present-value-of-exercise-price-is-added-to-call-option-which-is-equal-to\/","title":{"rendered":"Input call parity relationship, present value of exercise price is added to call option which is equal to"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a974c1215192\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    put option stock                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    call option + stock                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"true\">\r\n                    call option + market price                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    put option + market price                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: <strong>C. call option + market price<\/strong><\/p>\n<p>Call parity is a relationship between the price of a call option, the price of the underlying asset, the strike price, and the risk-free interest rate. It states that the price of a call option is equal to the present value of the strike price plus the price of the underlying asset minus the price of a put option with the same strike price and expiration date.<\/p>\n<p>In other words, if you buy a call option, you are essentially buying the right to buy the underlying asset at the strike price on or before the expiration date. The present value of the strike price is the amount of money that you would have to invest today in order to have enough money to buy the underlying asset at the strike price on the expiration date. The price of the underlying asset is the current market price of the asset. The price of a put option is the amount of money that you would have to pay to buy a put option.<\/p>\n<p>If you buy a call option and the price of the underlying asset goes up, the value of your call option will go up. If you buy a call option and the price <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n               <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div>      <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> of the underlying asset goes down, the value of your call option will go down.<\/p>\n<p>Call parity can be used to hedge against losses in the underlying asset. If you own the underlying asset, you can buy a call option to protect yourself against losses if the price of the asset goes down. If you buy a call option, you are essentially buying insurance against losses in the underlying asset.<\/p>\n<p>Call parity can also be used to speculate on the price of the underlying asset. If you believe that the price of the underlying asset is going to go up, you can buy a call option. If you believe that the price of the underlying asset is going to go down, you can sell a call option.<\/p>\n<p>Call parity is a powerful tool that can be used to manage risk or speculate on the price of the underlying asset.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Input call parity relationship, present value of exercise price is added to call option which is equal to<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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