I’m having trouble understanding this question from the Schweser notes:
A synthetic European put option is created by:
A. buying the discount bond, buying the call option, and short-selling the stock
B. buying the call option, short-selling the discount bond, and short-selling the stock
C. short-selling the stock, buying the discount bond, and selling the call option
The book lists A as the correct answer, but even after reading the explanation I don’t understand why. What’s the simplest way to approach this type of question?
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