1. You own a stock portfolio worth 50,000 dollars. You are worried that the stock prices may take a dip before you are ready to sell so you are considering purchasing either at the money or out of the money puts. If you decide to purchase the out of the money puts your maximum loss is_____than if you buy at the money puts and your maximum gain is______.
A. greater; lower
B. greater; greater
C. lower; greater
D. lower; lower
2. Consider the following cash flows:
Year Cash Flow
0 –$ 7,400
1 2,100
2 4,700
3 1,900
4 1,600
What is the payback period for the cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Payback period years