You buy an insurance policy on your car. The contract represents that, if the car has...

You buy an insurance policy on your car. The contract represents that, if the car has incurs more than $500 worth of damage, the insurance company will pay for the amount of the bill in excess of that amount. Which statement below is most accurate?

A. You are the issuer of a put option, and the insurance company is the purchaser of that put option.

B. You are the buyer of a call option, and the insurance company is the seller of that call option.

C. You are the purchaser of a put option, and the insurance company is the seller of that put option.

D. You are the seller of a call option, and the insurance company is the buyer of that call option.

Which of the following is false about hedge funds?

A. They are heavily regulated.

B. They use private sources of capital.

C. The compensation to their managers is performance-based.

D. They are illiquid.

Solutions

Expert Solution

B: You are the buyer of the call option, and the insurer company is the seller of that call otion.

A call option gives the right to buyer to exercise his right if the damages are more than $500. The insurance company being th seller is obligated to pay for the damages.

A: They are heavily regulated

Hedge funds are not heavily regulated.

jeff jeffy answered 2 years ago

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