Question

Determine which of the following statements are True (T) and which are False (not true) (F).

1. _____    Macaulay Duration and term are inversely related.
2. _____    Bachelier was a partner of LTCM.
3. _____    Put-Call Parity states that .
4. _____    One can purchase stock by being assigned when short a put option.
5. ______   The Gamma of calls is positive and of puts is negative.
6. ______ In polling a greater confidence level results in a more accurate estimate of the population mean.
7. ______  .
8. ______One can hedge a position in a commodity by taking the opposite position in the futures market.
9. ______ The greater the Sharpe Ratio of a portfolio of stocks the less desirable it is to own the portfolio.
10. ______   

Answer 1

1. False -The Macaulay duration is the weighted average term to maturity of the cash flows from a bond
2. False -Bachelier was not a partner of LTCM
3. True -about put-call parity
4. True-  One can purchase stock by being assigned when short a put option.
5. False -All long options (either calls or puts) have positive Gamma, while all short options have negative Gamma.
6. True
7. True - for hedging, you can take opposite position in futures
8. False -the greater the value of the Sharpe ratio, the more attractive the stock will be.