Which one of the following will provide you with the same value that you would have if you just purchased BAT stock?
A)sell a put option on BAT stock and invest at the risk-free rate of return
B)buy both a call option and a put option on BAT stock and also lend out funds at the risk-free rate
C)sell a put and buy a call on BAT stock as well as invest at the risk-free rate of return
D)lend out funds at the risk-free rate of return and sell a put option on BAT stock
E)borrow funds at the risk-free rate of return and invest the proceeds in equivalent amounts of put and call options on BAT stock

Question

Quizplus · Accepted Answer

Selling a put and buying a call on BAT stock will give you the same exposure to the stock as owning it directly. Investing at the risk-free rate will also give you the same return as you would receive from holding the stock. Therefore, this combination of options and risk-free investing will provide the same value as purchasing the BAT stock directly. Other options presented will not give you the exact same exposure and return as owning the stock.

Which One of the Following Will Provide You with the Same