CFA Practice Question

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CFA Practice Question

How can a synthetic long position in an asset be replicated using derivative and risk-free asset?

A. Buying risk-free asset and selling derivative
B. Buying risk-free asset and buying derivative
C. Selling risk-free asset and buying derivative
Correct Answer: B

A synthetic position in an asset can be replicated by taking a long position in the risk-free asset and a long position in the derivatives.

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