Question

7. Are these two statements correct?
Statement 1: The put/call open interest ratio is the volume (number) of put contracts traded in a day
divided by the volume (number) of call contracts traded in a day.
Statement 2: The implied volatility is the return standard deviation that would cause the estimated value
of an option (using an option pricing model) to be equal to the option’s current market price.
A. Both statements are correct.
B. Both statements are incorrect.
C. Only Statement 1 is correct.
D. Only Statement 2 is correct.

8. Are these two statements correct?
Statement 1: When a company is both repurchasing shares and paying cash dividends, the analyst must
value the stock using a TCFM (total cash flow model) instead of a DDM (dividend discount model).
Statement 2: When a company substitutes share repurchases for cash dividends, this will result in a
wealth increase for those shareholders who do not sell their shares.
A. Both statements are correct.
B. Both statements are incorrect.
C. Only statement 1 is correct.
D. Only statement 2 is correct.

Answer 1

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