Question 1

An option that can be exercised only at maturity is referred to as:

Accepted Answer

A)   a European option
B)   a call option
C)   a protective put
D)   an American optionE) A) and B)
F) B) and D)

Question 2

An option can be:

Accepted Answer

A)   I, II, III, IV
B)   I, II, III only
C)   I, II only
D)   I onlyI.in the moneyII.out of the moneyIII.at the moneyIV.shallowE) B) and C)
F) C) and D)

Question 3

The time value on call option A is $5 and the option premium is $8.What is the intrinsic value of call option A?

Accepted Answer

A)   $40
B)   $13
C)   −$3
D)   $3E) B) and C)
F) A) and B)

Question 4

Put-call parity can be used to assess:

Accepted Answer

A)   any arbitrage opportunity between call and put.
B)   how far in-the-money call options can get.
C)   the precise relationship between put and call prices given unequal exercise prices and unequal expiration dates.
D)   all of the above.E) None of the above
F) All of the above

Question 5

_________is an estimate of the ________ of the underlying asset based on observed option prices.

Accepted Answer

A)   Price volatility; estimated volatility
B)   Implied volatility; price volatility
C)   Price volatility; implied volatility
D)   Estimated volatility; price volatilityE) A) and B)
F) C) and D)

Question 6

Francis is long the underlying and has sold h number of call options with the following binomial tree:
  
Given the current asset price is $20 and r is 5%,what is the price of the above call option?

Accepted Answer

A)   $2.86
B)   $0.60
C)   $21.43
D)   −$21.43E) None of the above
F) A) and B)

Question 7

Min has created the following portfolio:
bought a share for $20
bought 3 puts,strike price $18
maturity 1yr
Suppose at expiration ST is $17.What is the payoff of her strategy?

Accepted Answer

A)   $0
B)   $3
C)   −$2
D)   −$3E) B) and D)
F) B) and C)

Question 8

Create a table illustrating the range of payoffs of a protective put strategy for the following values of the underlying asset: 60,70,80,90,100.The strike price of all options in the strategy is $80 and the current value of the underlying asset is $80.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Long asset payoff =...

Question 9

A call option is:

Accepted Answer

A)   the right to buy an underlying asset at a fixed price for a specified time.
B)   the right to sell an underlying asset at a fixed price for a specified time.
C)   a price established today for future delivery.
D)   a standardized exchange-traded contract in which the seller agrees to deliver a commodity to the buyer at some point in the future.E) None of the above
F) A) and B)

Question 10

The intrinsic value of an in-the-money put option is:

Accepted Answer

A)   X−ST
B)   ST −X
C)   X−ST+P
D)   0E) None of the above
F) All of the above

Question 11

Which of the following strategies does NOT require the investor to long a put?

Accepted Answer

A)   Collar
B)   Covered call
C)   Synthetic call and synthetic put
D)   Protective putE) All of the above
F) C) and D)

Question 12

Which of the following best defines a covered call?

Accepted Answer

A)   Purchase a put option to protect a long position in an underlying asset.
B)   Position between the floor and ceiling price.
C)   The right, but not an obligation, to sell an underlying asset at a fixed price for a specified time.
D)   Selling call options while owning the underlying assetE) B) and C)
F) A) and D)

Question 13

(Assume: continuous compounding and value of the underlying asset is $22)
Marie wants to determine the fair value of a put option with strike price $20 due to expire in 2 years.A call with the same strike price and expiration is worth $5.The risk-free rate is 4%.What would you tell Marie is the fair value of the put option?

Accepted Answer

Using put-call parit...

Question 14

Which of the following types of option is more valuable?

Accepted Answer

A)   American put option
B)   European put option
C)   Need additional information
D)   Neither oneE) All of the above
F) None of the above

Question 15

Which of the following statements is NOT true?

Accepted Answer

A)   An increase in interest rates decreases the value of a call option.
B)   An increase in volatility increases the value of a call option.
C)   A decrease in volatility decreases the value of a put option.
D)   An increase in the underlying asset's price decreases the value of a put.E) B) and D)
F) C) and D)

Question 16

Using the following information,find the price of the call option:
Stock price St=$ 55,interest rate I=5%,
Strike price X=$ 52,Put premium=$ 1,Maturity: T=3 months

Accepted Answer

A)   $6.47
B)   $0.62
C)   $8.47
D)   $4.64E) A) and B)
F) All of the above

Question 17

Given current asset price = $50
strike price = $50
risk-free rate = 1%
time to expiration of the option = 2 years
N(d1) = 0.5793
N(d2) = 0.4602
Based on the Black-Scholes option pricing model,calculate the price of the corresponding call option (round to 2 decimal places) .

Accepted Answer

A)   $0
B)   $5.49
C)   $5.96
D)   $6.41E) A) and B)
F) A) and D)

Question 18

The strike price on a call option is $8 and the price of the underlying stock is $10.What is the time value of money of the call option if the option premium is $3?

Accepted Answer

A)   $4
B)   $3
C)   −$2
D)   $1E) A) and B)
F) A) and C)

Question 19

Which of the following factors increases the price of a put option?

Accepted Answer

A)   Higher asset price, higher strike price, increased volatility, increased dividends
B)   Higher strike price, longer time to expiration, increased volatility, increased dividends
C)   Higher strike price, longer time to expiration, increased volatility, increased interest rates
D)   Longer time to expiration, increased volatility, decreasing interest rates, decreasing dividendsE) B) and C)
F) All of the above

Question 20

____________is the relationship between the price of a call option and a put option.

Accepted Answer

A)   The binomial option pricing model
B)   The Black-Scholes option pricing model
C)   Put-call parity
D)   A swapE) A) and B)
F) B) and D)

Exam 12: Options

_is an estimate of the of the underlying asset based on observed option prices.

Correct Answer
verified

Which of the following best defines a covered call?

Correct Answer
verified

Francis is long the underlying and has sold h number of call options with the following binomial tree: Given the current asset price is $20 and r is 5%,what is the price of the above call option?

Correct Answer
verified

The time value on call option A is $5 and the option premium is $8.What is the intrinsic value of call option A?

Correct Answer
verified

Which of the following statements is NOT true?

Correct Answer
verified

Put-call parity can be used to assess:

Correct Answer
verified

Which of the following factors increases the price of a put option?

Correct Answer
verified

Min has created the following portfolio: bought a share for $20 bought 3 puts,strike price $18 maturity 1yr Suppose at expiration S_T is $17.What is the payoff of her strategy?

Correct Answer
verified

The strike price on a call option is $8 and the price of the underlying stock is $10.What is the time value of money of the call option if the option premium is $3?

Correct Answer
verified

Correct Answer
verified
Using put-call parit...
View Answer

An option can be:

Correct Answer
verified

The intrinsic value of an in-the-money put option is:

Correct Answer
verified

Create a table illustrating the range of payoffs of a protective put strategy for the following values of the underlying asset: 60,70,80,90,100.The strike price of all options in the strategy is $80 and the current value of the underlying asset is $80.

Correct Answer
verified
Long asset payoff =...
View Answer

Which of the following types of option is more valuable?

Correct Answer
verified

Given current asset price = $50 strike price = $50 risk-free rate = 1% time to expiration of the option = 2 years N(d₁) = 0.5793 N(d₂) = 0.4602 Based on the Black-Scholes option pricing model,calculate the price of the corresponding call option (round to 2 decimal places) .

Correct Answer
verified

____________is the relationship between the price of a call option and a put option.

Correct Answer
verified

Using the following information,find the price of the call option: Stock price S_t=$ 55,interest rate I=5%, Strike price X=$ 52,Put premium=$ 1,Maturity: T=3 months

Correct Answer
verified

Which of the following strategies does NOT require the investor to long a put?

Correct Answer
verified

A call option is:

Correct Answer
verified

An option that can be exercised only at maturity is referred to as:

Correct Answer
verified

Exam 12: Options

_________is an estimate of the ________ of the underlying asset based on observed option prices.

Correct AnswerverifiedShow Answer

Which of the following best defines a covered call?

Correct AnswerverifiedShow Answer

Francis is long the underlying and has sold h number of call options with the following binomial tree: Given the current asset price is $20 and r is 5%,what is the price of the above call option?

Correct AnswerverifiedShow Answer

The time value on call option A is $5 and the option premium is $8.What is the intrinsic value of call option A?

Correct AnswerverifiedShow Answer

Which of the following statements is NOT true?

Correct AnswerverifiedShow Answer

Put-call parity can be used to assess:

Correct AnswerverifiedShow Answer

Which of the following factors increases the price of a put option?

Correct AnswerverifiedShow Answer

Min has created the following portfolio: bought a share for $20 bought 3 puts,strike price $18 maturity 1yr Suppose at expiration ST is $17.What is the payoff of her strategy?

Correct AnswerverifiedShow Answer

The strike price on a call option is $8 and the price of the underlying stock is $10.What is the time value of money of the call option if the option premium is $3?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedUsing put-call parit...View AnswerShow Answer

An option can be:

Correct AnswerverifiedShow Answer

The intrinsic value of an in-the-money put option is:

Correct AnswerverifiedShow Answer

Create a table illustrating the range of payoffs of a protective put strategy for the following values of the underlying asset: 60,70,80,90,100.The strike price of all options in the strategy is $80 and the current value of the underlying asset is $80.

Correct Answerverified Long asset payoff =...View AnswerShow Answer

Which of the following types of option is more valuable?

Correct AnswerverifiedShow Answer

Given current asset price = $50 strike price = $50 risk-free rate = 1% time to expiration of the option = 2 years N(d1) = 0.5793 N(d2) = 0.4602 Based on the Black-Scholes option pricing model,calculate the price of the corresponding call option (round to 2 decimal places) .

Correct AnswerverifiedShow Answer

____________is the relationship between the price of a call option and a put option.

Correct AnswerverifiedShow Answer

Using the following information,find the price of the call option: Stock price St=$ 55,interest rate I=5%, Strike price X=$ 52,Put premium=$ 1,Maturity: T=3 months

Correct AnswerverifiedShow Answer

Which of the following strategies does NOT require the investor to long a put?

Correct AnswerverifiedShow Answer

A call option is:

Correct AnswerverifiedShow Answer

An option that can be exercised only at maturity is referred to as:

Correct AnswerverifiedShow Answer

_is an estimate of the of the underlying asset based on observed option prices.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Min has created the following portfolio: bought a share for $20 bought 3 puts,strike price $18 maturity 1yr Suppose at expiration S_T is $17.What is the payoff of her strategy?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Using put-call parit...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Long asset payoff =...
View Answer

Correct Answer
verified

Given current asset price = $50 strike price = $50 risk-free rate = 1% time to expiration of the option = 2 years N(d₁) = 0.5793 N(d₂) = 0.4602 Based on the Black-Scholes option pricing model,calculate the price of the corresponding call option (round to 2 decimal places) .

Correct Answer
verified

Correct Answer
verified

Using the following information,find the price of the call option: Stock price S_t=$ 55,interest rate I=5%, Strike price X=$ 52,Put premium=$ 1,Maturity: T=3 months

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified