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SOFE Exam AFE Topic 1 Question 77 Discussion

Actual exam question for SOFE's AFE exam
Question #: 77
Topic #: 1
[All AFE Questions]

Insurance entities usually write covered-call options because they consider the premium received for writing the options to be either:

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Suggested Answer: D

by Merissa at May 31, 2024, 07:26 PM

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Tyisha
9 months ago
Definitely B. The premium is all about reducing the yield on the underlying risk security. It's like the insurance company is trying to squeeze every last drop of profit out of it.
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Coral
8 months ago
Yeah, it's all about managing risk and maximizing returns.
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Cherri
8 months ago
It's like a way for insurance companies to maximize their profits.
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Vincenza
9 months ago
I agree, the premium is definitely about reducing the yield on the underlying risk security.
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Kallie
9 months ago
So, it's like a win-win situation for them - reducing risk and increasing returns at the same time.
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Wynell
9 months ago
It's a smart move by insurance entities to use the premium as a way to manage risk and maximize profits.
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Nakita
9 months ago
I agree, the premium from writing covered-call options does decrease the yield on the underlying risk security.
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Mollie
10 months ago
I agree with Sarah. Writing covered-call options can provide both an economic hedge and decrease in yield on the underlying risk security.
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Sarah
10 months ago
I think the answer is C) Both A & B.
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Kimi
10 months ago
Hmm, I'm not so sure. Isn't the premium just a way for the insurance entity to make some extra cash on the side? I mean, who cares about the underlying security when you're raking in the dough, right?
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Gaynell
10 months ago
I think the answer is C. The premium received for writing covered-call options is both an economic hedge and a decrease in yield on the underlying security. It's a win-win situation!
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Cristal
9 months ago
Yes, it's a great strategy for insurance entities to manage risk and generate additional returns.
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Ty
9 months ago
Yes, writing covered-call options can provide both protection and income.
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Brianne
9 months ago
I agree, writing covered-call options can provide both protection and income.
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Octavio
9 months ago
I agree, it's definitely a win-win situation.
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