Question

24) Which of the following characteristic(s) of a capital protected product is/are true: I. The capital...

24) Which of the following characteristic(s) of a capital protected product is/are true: I. The capital protection is defined as a percentage of the nominal value (100%) II. The value of the product may fall below its capital protection during its lifetime III. The investor is expecting rising volatility of the underlying asset IV. The capital protected product equals to an investment plus long a call or long a put on the underlying asset

A) I only

B) I and II

C) I, II and IV

D) I, II and III

E) All of the above

Homework Answers

Answer #1

The capital protection is always defined as the percentage of the normal value and the capital is always protected in a capital protected fund so even if the value of the product, fall below the capital protection during the lifetime.

It will otfer hedge against rising volatility as well, so it will always mean that an investment plus long a put.

It will not mean long call as well as investment because it will lead to double exposure on the upside.

Correct answer is option (d) I,II, and III

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