8. Trenton Industrial Fans has a pure discount loan with a face value of $250,00

Question

8. Trenton Industrial Fans has a pure discount loan with a face value of $250,000 due in one year. The assets of the firm are currently worth $315,000. The shareholders in this firm basically own a option on the assets of the firm with a strike price of: a. put; $250,000 b. put; $315,000. c. warrant; $315,000. d. call; $250,000. e. call; $315,000. 9. Which one of the following entails the purchase of a put option on a stock to limit the downside risk associated with owning that stock? a. put-call parity b. covered call c. protective put d. straddle e. strangle

Explanation / Answer

8)

As assets are already available

Option A: Put ; 250000

9)

Option C

protective put

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