Exam 25: Option Valuation

The one-year call on TLM stock with a strike price of $65 is priced at $2.20 while the one-year put with a strike price of $65 is priced at $11.18. The annual risk-free rate is 3.8 percent, compounded continuously. What is the current price of TLM stock?

(Multiple Choice)

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Question 41

Which one of the following can be used to replicate a protective put strategy?

(Multiple Choice)

4.8/5

(83)

Question 42

Which one of the following statements related to options is correct?

(Multiple Choice)

4.7/5

(65)

Question 43

Which one of these is most equivalent to e− ᴿᵗ?

(Multiple Choice)

4.7/5

(72)

Question 44

WT Foods stock is selling for $38 a share. The 6-month $40 call on this stock is selling for $2.01 while the 6-month $40 put is priced at $3.60. What is the continuously compounded risk-free rate of return?

(Multiple Choice)

4.9/5

(85)

Question 45

Use the information below to answer the following question. Assume a stock price of $88; risk-free rate of 4 percent per year, compounded continuously; time to maturity of five months; standard deviation of 48 percent per year; and a put and call exercise price of $85. What is the delta of the put option?

(Multiple Choice)

4.9/5

(78)

Question 46

Which one of the following statements is correct?

(Multiple Choice)

4.9/5

(87)

Question 47

What is the value of a 6-month put with a strike price of $27.50 if the stock price is $22.60, the 6-month $27.50 call is priced at $1.46, and the risk-free rate is 3.5 percent, compounded continuously?

(Multiple Choice)

4.9/5

(83)

Question 48

Which one of the following statements is correct?

(Multiple Choice)

4.8/5

(80)

Question 49

Assume the risk-free rate increases by one percent. Which one of the following measures the effect this change will have on the value of a firm's stock options?

(Multiple Choice)

4.9/5

(90)

Question 50

Under European put-call parity, the present value of the strike price is equivalent to the present value of:

(Multiple Choice)

4.8/5

(90)

Question 51

The shareholders of a firm will benefit the most from a positive net present value project when the delta of the call option on the firm's assets is:

(Multiple Choice)

4.8/5

(84)

Question 52

Assume the risk-free rate increases. This change will the value of call options and the value of put options on shares of stock.

(Multiple Choice)

4.8/5

(77)

Question 53

Day's End stock is selling for $43 a share. The 6-month call with a strike price of $45 is priced at $.30. Risk-free assets are currently returning 4.1 percent per year, compounded continuously. What is the price of a 6-month put with a strike price of $45?

(Multiple Choice)

4.8/5

(82)

Question 54

J&N stock has a current market price of $51.97 a share and the annual risk-free rate is 4.2 percent, compounded continuously. The 1-year call on this stock with a strike price of $55 is priced at $2.30. What is the price of the one-year put with a strike price of $55?

(Multiple Choice)

4.8/5

(77)

Question 55

In the put-call parity formula, the present value of the exercise price is computed using the:

(Multiple Choice)

4.7/5

(79)

Question 56

Paying off a firm's debt is comparable to ________ on the assets of the firm.

(Multiple Choice)

4.9/5

(86)

Question 57

Which one of the following cannot be either used by or calculated by the Black-Scholes option pricing model?

(Multiple Choice)

4.8/5

(73)

Question 58

Assume a stock price of $21.80, an exercise price of $20, three months to expiration, a risk-free rate of 3.40 percent, standard deviation of 46 percent, and a d₁ value of .52664. What is the value of d₂ as it is used in the Black-Scholes option pricing model?

(Multiple Choice)

4.9/5

(77)

Question 59

The value of the risky debt of a firm is equal to the value of:

(Multiple Choice)

4.8/5

(92)

Question 60

Showing 41 - 60 of 78

Exam 25: Option Valuation

The one-year call on TLM stock with a strike price of $65 is priced at $2.20 while the one-year put with a strike price of $65 is priced at $11.18. The annual risk-free rate is 3.8 percent, compounded continuously. What is the current price of TLM stock?

Which one of the following can be used to replicate a protective put strategy?

Which one of the following statements related to options is correct?

Which one of these is most equivalent to e− ᴿᵗ?

WT Foods stock is selling for $38 a share. The 6-month $40 call on this stock is selling for $2.01 while the 6-month $40 put is priced at $3.60. What is the continuously compounded risk-free rate of return?

Which one of the following statements is correct?

What is the value of a 6-month put with a strike price of $27.50 if the stock price is $22.60, the 6-month $27.50 call is priced at $1.46, and the risk-free rate is 3.5 percent, compounded continuously?

Which one of the following statements is correct?

Assume the risk-free rate increases by one percent. Which one of the following measures the effect this change will have on the value of a firm's stock options?

Under European put-call parity, the present value of the strike price is equivalent to the present value of:

The shareholders of a firm will benefit the most from a positive net present value project when the delta of the call option on the firm's assets is:

Assume the risk-free rate increases. This change will ________ the value of call options and ________ the value of put options on shares of stock.

Day's End stock is selling for $43 a share. The 6-month call with a strike price of $45 is priced at $.30. Risk-free assets are currently returning 4.1 percent per year, compounded continuously. What is the price of a 6-month put with a strike price of $45?

J&N stock has a current market price of $51.97 a share and the annual risk-free rate is 4.2 percent, compounded continuously. The 1-year call on this stock with a strike price of $55 is priced at $2.30. What is the price of the one-year put with a strike price of $55?

In the put-call parity formula, the present value of the exercise price is computed using the:

Paying off a firm's debt is comparable to ________ on the assets of the firm.

Which one of the following cannot be either used by or calculated by the Black-Scholes option pricing model?

Assume a stock price of $21.80, an exercise price of $20, three months to expiration, a risk-free rate of 3.40 percent, standard deviation of 46 percent, and a d₁ value of .52664. What is the value of d₂ as it is used in the Black-Scholes option pricing model?

The value of the risky debt of a firm is equal to the value of:

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working with Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons from Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Mergers and Acquisitions

Leasing

Filters

Assume the risk-free rate increases. This change will the value of call options and the value of put options on shares of stock.