Question 1

Which one of the following options is in the money?

Accepted Answer

A) call with a $45 strike and an underlying stock price of $42 
B) put with a $35 strike and an underlying stock price of $36 
C) call with a $15 strike and an underlying stock price of $15 
D) put with a $45 strike and an underlying stock price of $42 
E) call with a $30 strike and an underlying stock price of $29 
A) call with a $45 strike and an underlying stock price of $42 
B) put with a $35 strike and an underlying stock price of $36 
C) call with a $15 strike and an underlying stock price of $15 
D) put with a $45 strike and an underlying stock price of $42 
E) call with a $30 strike and an underlying stock price of $29

Question 2

Jennifer purchased 3 put option contracts on Winslow Mfg. stock. The option premium was $.75 and the strike price was $27.50. On the expiration date, the stock was selling for $27.75 a share. What is the total payoff on the option contracts?

Accepted Answer

A) −$100 
B) −$50 
C) $0 
D) $50 
E) $150 
A) −$100 
B) −$50 
C) $0 
D) $50 
E) $150

Question 3

A 4-month call has a strike price of $16. The current underlying stock price is $18.35. What is the intrinsic value of this call?

Accepted Answer

A) $0 
B) $1.35 
C) $1.45 
D) $2.35 
E) $3.35 
A) $0 
B) $1.35 
C) $1.45 
D) $2.35 
E) $3.35

Question 4

Theo paid a total of $50 to purchase 4 call options with a strike price of $54. What is the break-even stock price?

Accepted Answer

A) $12.50 
B) $25.00 
C) $23.63 
D) $54.13 
E) $56.32 
A) $12.50 
B) $25.00 
C) $23.63 
D) $54.13 
E) $56.32

Question 5

The maximum option payoff from:

Accepted Answer

A) writing a put is $0. 
B) buying a put is $0. 
C) writing a call is an unlimited profit. 
D) buying a call is the strike price. 
E) writing a call is the stock price. 
A) writing a put is $0. 
B) buying a put is $0. 
C) writing a call is an unlimited profit. 
D) buying a call is the strike price. 
E) writing a call is the stock price.

Question 6

A stock is valued at $53.90 a share. A European 3-month call option has a strike price of $52 and an option premium of $2.50. The market rate is 8.5% and the risk-free rate is 1.25%. What is the price of a European 3-month put option with a $52 strike price?

Accepted Answer

A) $0 
B) $.44 
C) $.40 
D) $.48 
E) $.61 
A) $0 
B) $.44 
C) $.40 
D) $.48 
E) $.61

Question 7

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50. The option premium was $.65. At expiration, the stock was valued at $44.90 a share. What is her percentage return?

Accepted Answer

A) −100.00% 
B) 0% 
C) 5.47% 
D) 32.82% 
E) 300.00% 
A) −100.00% 
B) 0% 
C) 5.47% 
D) 32.82% 
E) 300.00%

Question 8

You purchased 1 SPX call option with a strike of 1500. You wrote one SPX call option with the same maturity date and a strike of 1450. At maturity, what is your payoff if the S&P 500 is at 1475?

Accepted Answer

A) −$2,500 
B) −$250 
C) $25 
D) $250 
E) $2,500 
A) −$2,500 
B) −$250 
C) $25 
D) $250 
E) $2,500

Question 9

Which one of the following terms is defined as an option with a strike price that is equal to the underlying price?

Accepted Answer

A) in-the-money option 
B) at-the-money option 
C) equitable straddle 
D) crossed option 
E) out-of-the money option 
A) in-the-money option 
B) at-the-money option 
C) equitable straddle 
D) crossed option 
E) out-of-the money option

Which one of the following options is in the money?

Jennifer purchased 3 put option contracts on Winslow Mfg. stock. The option premium was $.75 and the strike price was $27.50. On the expiration date, the stock was selling for $27.75 a share. What is the total payoff on the option contracts?

A 4-month call has a strike price of $16. The current underlying stock price is $18.35. What is the intrinsic value of this call?

Theo paid a total of $50 to purchase 4 call options with a strike price of $54. What is the break-even stock price?

The maximum option payoff from:

A stock is valued at $53.90 a share. A European 3-month call option has a strike price of $52 and an option premium of $2.50. The market rate is 8.5% and the risk-free rate is 1.25%. What is the price of a European 3-month put option with a $52 strike price?

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50. The option premium was $.65. At expiration, the stock was valued at $44.90 a share. What is her percentage return?

You purchased 1 SPX call option with a strike of 1500. You wrote one SPX call option with the same maturity date and a strike of 1450. At maturity, what is your payoff if the S&P 500 is at 1475?

Which one of the following terms is defined as an option with a strike price that is equal to the underlying price?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 15: Stock Options

Which one of the following options is in the money?

Jennifer purchased 3 put option contracts on Winslow Mfg. stock. The option premium was $.75 and the strike price was $27.50. On the expiration date, the stock was selling for $27.75 a share. What is the total payoff on the option contracts?

A 4-month call has a strike price of $16. The current underlying stock price is $18.35. What is the intrinsic value of this call?

Theo paid a total of $50 to purchase 4 call options with a strike price of $54. What is the break-even stock price?

The maximum option payoff from:

A stock is valued at $53.90 a share. A European 3-month call option has a strike price of $52 and an option premium of $2.50. The market rate is 8.5% and the risk-free rate is 1.25%. What is the price of a European 3-month put option with a $52 strike price?

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50. The option premium was $.65. At expiration, the stock was valued at $44.90 a share. What is her percentage return?

You purchased 1 SPX call option with a strike of 1500. You wrote one SPX call option with the same maturity date and a strike of 1450. At maturity, what is your payoff if the S&P 500 is at 1475?

Which one of the following terms is defined as an option with a strike price that is equal to the underlying price?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters