Final answer:
If Jennifer expects the price of a stock to decrease, she should consider buying put options to earn a profit if the expected decrease occurs. Short selling is chancy due to its unlimited potential loss, buying the stock or call options anticipates a price rise and a rise in the supply of money in the financial market typically leads to a decline in interest rates. Option c is the correct answer.
Step-by-step explanation:
Jennifer expects the price of a stock to decrease over the next month. She can employ several strategies to profit from this anticipated decrease. Buying more of the stock or call options would not be beneficial, as these strategies profit from a rise in stock prices. Short selling is a strategy wherein an investor borrows shares and sells them with the intent to repurchase them at a lower price, thereby making a profit.
However, this strategy is accompanied by unlimited risk if the stock price were to rise instead. Buying put options is the most pertinent in this scenario. Put options give the buyer the right, but not the obligation, to sell the underlying security at a specified price before a specified date. Therefore, if the stock's price declines as Jennifer anticipates, the value of the put options will increase, allowing her to sell them at a higher price than she paid, securing a profit from the decrease in the underlying stock's price.
Turning to the changes in the financial market that lead to a decline in interest rates, a rise in supply of money would typically lead to lower interest rates. When there's more money available for borrowing, the cost of borrowing, which is effectively the interest rate, tends to go down.