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  3. 1. consider a portfolio consisting of a long call

1. Consider a portfolio consisting of a long call with an exercise price of X,...

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Finance

1. Consider a portfolio consisting of a long call with an exercise price of X, a short position in a non-dividend paying stock at an initial price of S0, and the purchase of riskless bonds with a face value of X and maturing when the call expires. What should such a portfolio be worth?

a. none of the above

b. C + P X(1 + r)-T

c. C S0

d. P X

e. P + S0 X(1 + r)-T

2. Under uncertainty and risk aversion, todays spot price equals

a. the expected future spot price, minus the storage costs, minus the interest forgone, minus the risk premium

b. the expected future spot price, minus the storage costs, minus the interest forgone, plus the risk premium

c. the expected future spot price, minus the storage costs, minus the risk premium

d. the future spot price minus the cost of storage

e. none of the above

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