Exam 16: Option Valuation

What is the call option premium given the following information? Stock price \ 36.00 Strike price \ 30.00 Volatility 16\% Pividend Yield 0 Time (years) .75 Rigk-free Rate 2.70\%

What is the call option premium given the following information? Stack price \4 7 Strike price \4 0 Standard deviation 44\% Risk-free rate 4\% Dividend yield 0\% Time (years) .25

Which option price(s)will increase when the dividend yield increases?

You own shares of AZT stock. Which of the following strategies can you use to hedge your risk associated with a price decrease in AZT stock? I. buy call options II. write call options III. buy put options IV. write put options

The VIX is a measure of which one of the following?

Which option price(s)will increase when the interest rate increases?

What is the put option premium given the following information? Time (years) .5 Strike price \ 25.00 Stock price \ 24.50 Risk-free rate 2.00\% Volatility 30\%

Which one of the following statements is correct concerning the Black-Scholes option pricing model?

Which one of the following situations will produce the highest put price, all else constant? Assume the options are all in the money.

An increase in which one of the following will have a negative effect on the price of a call option?

You know that a call will finish in the money. Based on that single piece of information, you also know which one of the following?

You own 800 shares of Bradley Co. stock that is currently priced at $33 a share. Given this price, the option delta for a $35 call option on this stock is .66. How many $35 call options do you need to hedge against a −$1 change in the price of the stock?

An employee stock option is which one of the following?

Which one of the following inputs is included in the Black-Scholes-Merton model but not in the Black-Scholes model?

Which one of the following situations will produce the highest call price, all else constant?

A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of .9 each period over the next two periods. The risk-free rate of interest is 4.5%. What is the current value of a call option with a strike price of $20?

Mike was granted stock options on 10,000 shares of his employer's stock. The stock is currently selling for $53.93 a share and has a standard deviation of 18%. The option's strike price is $52.39 and the time to maturity is 5 years. What is the value of each option given a risk-free rate of 1.2%? Assume that no dividends are paid.

You own 2,500 shares of Jordan Co. stock, which is currently, valued at $38 a share. The $40 put has a premium of $2.25 and a put delta of −.25. What position should you take in $40 put contracts to hedge your stock against a $1 decrease in price?

A stock with a current price of $25 will either move up to $32 or down to $20 over the next period. The risk-free rate of interest is 3.5%. What is the value of a call option with a strike price of $30?

Which of the following statements related to employee stock options (ESO)are generally correct? I. ESO vesting encourages long-term employment. II. Most ESOs are issued at the money. III. ESOs cannot be resold. IV. ESOs that are in the money are frequently repriced.