Question 1

Which of the inputs in the Black-Scholes option pricing model are directly observable?

Accepted Answer

A)  The price of the underlying security 
B)  The risk-free rate of interest 
C)  The time to expiration 
D)  The variance of returns of the underlying asset return 
E)  The price of the underlying security, risk-free rate of interest, and time to expiration 
A)  The price of the underlying security 
B)  The risk-free rate of interest 
C)  The time to expiration 
D)  The variance of returns of the underlying asset return 
E)  The price of the underlying security, risk-free rate of interest, and time to expiration

Question 2

Other things equal, the price of a stock call option is positively correlated with the following factors except

Accepted Answer

A)  the stock price. 
B)  the time to expiration. 
C)  the stock volatility. 
D)  the exercise price. 
A)  the stock price. 
B)  the time to expiration. 
C)  the stock volatility. 
D)  the exercise price.

Question 3

A put option on the S&P 500 Index will best protect a portfolio

Accepted Answer

A)  of 100 shares of IBM stock. 
B)  of 50 bonds. 
C)  that corresponds to the S&P 500. 
D)  of 50 shares of AT&T and 50 shares of Xerox stocks. 
E)  that replicates the Dow. 
A)  of 100 shares of IBM stock. 
B)  of 50 bonds. 
C)  that corresponds to the S&P 500. 
D)  of 50 shares of AT&T and 50 shares of Xerox stocks. 
E)  that replicates the Dow.

Question 4

An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $50. The call premium is $14. What is the intrinsic value of the call?

Accepted Answer

A)  $12 
B)  $10 
C)  $6 
D)  $23 
A)  $12 
B)  $10 
C)  $6 
D)  $23

Question 5

Other things equal, the price of a stock put option is negatively correlated with which of the following factors?

Accepted Answer

A)  The stock price 
B)  The time to expiration 
C)  The stock volatility 
D)  The exercise price 
E)  The time to expiration, stock volatility, and exercise price 
A)  The stock price 
B)  The time to expiration 
C)  The stock volatility 
D)  The exercise price 
E)  The time to expiration, stock volatility, and exercise price

Question 6

The percentage change in the stock call-option price divided by the percentage change in the stock price is called

Accepted Answer

A)  the elasticity of the option. 
B)  the delta of the option. 
C)  the theta of the option. 
D)  the gamma of the option. 
A)  the elasticity of the option. 
B)  the delta of the option. 
C)  the theta of the option. 
D)  the gamma of the option.

Question 7

Other things equal, the price of a stock put option is positively correlated with which of the following factors?

Accepted Answer

A)  The stock price 
B)  The time to expiration 
C)  The stock volatility 
D)  The exercise price 
E)  The time to expiration, stock volatility, and exercise price 
A)  The stock price 
B)  The time to expiration 
C)  The stock volatility 
D)  The exercise price 
E)  The time to expiration, stock volatility, and exercise price

Question 8

The elasticity of an option is

Accepted Answer

A)  the volatility level for the stock that the option price implies. 
B)  the continued updating of the hedge ratio as time passes. 
C)  the percentage change in the stock call-option price divided by the percentage change in the stock price. 
D)  the sensitivity of the delta to the stock price. 
A)  the volatility level for the stock that the option price implies. 
B)  the continued updating of the hedge ratio as time passes. 
C)  the percentage change in the stock call-option price divided by the percentage change in the stock price. 
D)  the sensitivity of the delta to the stock price.

Question 9

An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $44. The call premium is $14. What is the intrinsic value of the call?

Accepted Answer

A)  $14 
B)  $9 
C)  $0 
D)  $23 
A)  $14 
B)  $9 
C)  $0 
D)  $23

Which of the inputs in the Black-Scholes option pricing model are directly observable?

Other things equal, the price of a stock call option is positively correlated with the following factors except

A put option on the S&P 500 Index will best protect a portfolio

An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $50. The call premium is $14. What is the intrinsic value of the call?

Other things equal, the price of a stock put option is negatively correlated with which of the following factors?

The percentage change in the stock call-option price divided by the percentage change in the stock price is called

Other things equal, the price of a stock put option is positively correlated with which of the following factors?

The elasticity of an option is

An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $44. The call premium is $14. What is the intrinsic value of the call?

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Efficient Diversification

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

Exam 21: Option Valuation

Which of the inputs in the Black-Scholes option pricing model are directly observable?

Other things equal, the price of a stock call option is positively correlated with the following factors except

A put option on the S&P 500 Index will best protect a portfolio

An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $50. The call premium is $14. What is the intrinsic value of the call?

Other things equal, the price of a stock put option is negatively correlated with which of the following factors?

The percentage change in the stock call-option price divided by the percentage change in the stock price is called

Other things equal, the price of a stock put option is positively correlated with which of the following factors?

The elasticity of an option is

An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $44. The call premium is $14. What is the intrinsic value of the call?

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Efficient Diversification

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters