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Vendor: Maryland Insurance Administration

Exam Code: Life-Producer Dumps

Questions and Answers: 104

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NEW QUESTION: 1
The rate of dividend on a stock goes up. What is the effect on the price of a put option on this stock?
A. It increases the value of the put
B. It does not affect the value of the put
C. It decreases the value of the put
D. It may affect the put value either way depending upon the risk-free rate
Answer: A
Explanation:
Explanation
Everything else remaining the same, an increase in the rate of dividends causes the value of call options to fall and the value of put options to rise. Therefore, Choice 'b' is the correct answer. (In the exam, the question could address either a call or a put option, so be aware of the answer in either case).
To understand this, consider how dividends are accounted for when valuing an option using the Black Scholes model. Future dividends are discounted to the present using the risk free rate and this discounted value is reduced from the spot price used in the BSM valuation. Effectively, this reduces the spot price used in the BSM formula. When the spot price reduces, and the exercise price remains the same, then the value of the call option goes down. In the same way, when spot price is reduced by the present value of dividends (and the exercise price stays the same), obviously the put option becomes more valuable. Therefore an increase in the rate of dividends increases the value of the put option.
There is another intuitive way to think about this: A call option is like a long position in the stock, but the holder of the call option is not entitled to receive dividends (unlike the holder of the stock). Since the holder of the call option has to forego the dividends, he is willing to pay less for the option; or in other words, the value of the call reduces.
In the same way, a put option is like having a short position in the stock. The holder of the short position has to borrow the stock in order to get into the short position in the first place. When dividends are paid, the holder of the short stock position has to make good any dividends that might be paid to the lender of the stock. The holder of a put option does not have to make any such payments. Therefore the put option is more valuable, and the existence of dividends (or an increase in dividends) increases the value of the put option.
(Try this out using the Black Scholes Excel model given under the tutorials by varying the spot price.)

NEW QUESTION: 2
Refer to the exhibit.

If the router Cisco returns the given output and has not had its router ID set manually, what value will OSPF use as its
router ID?
A. 192.168.1.1
B. 172.16.1.1
C. 2.2.2.2
D. 1.1.1.1
Answer: C
Explanation:
If a router-id is not configured manually in the OSPF routing process the router will automatically configure a router-id
determined from the highest IP address of a logical interface (loopback interface) or the highest IP address of an
active interface. If more than one loopback interfaces are configured, the router will compare the IP addresses of
each of the interfaces and choose the highest IP address from the loopbacks.

NEW QUESTION: 3
Which command do you use to create a local role while you are connected as the local user?
A. create role l_hr container=all;
B. create role c##_hr container=current;
C. create role l_hr container=current;
D. create local role l_hr;
Answer: A


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