Exam 25: Options

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Recently you bought a call and a put option on a stock with a common exercise price of $75.The call premium was $5 and the put premium was $3.You will make money from this position if the stock price is:

(Multiple Choice)

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Question 41

Define and briefly explain the relationship between value of a call option and the following five factors: Stock price, exercise price, interest rate, time to expiration, volatility of stock price.

(Essay)

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Question 42

Circular File stock is selling for $25 a share.You see that call options on the stock with exercise price of $20 are selling at $3.What should you do? What will happen to the option price as investors identify this opportunity? Then you observe that put options on Circular File with exercise price $30 are selling for $4.What should you do?

(Essay)

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Question 43

What is the option buyer's total profit or loss per share if a call option is purchased for a $5 premium, has a $50 exercise price, and the stock is valued at $53 at expiration?

(Multiple Choice)

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Question 44

Why would bondholders be willing to pay more for bonds that contain warrants?

(Essay)

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Question 45

How much must the stock be worth at expiration in order for a call holder to break even if the exercise price is $50 and the call premium was $4?

(Multiple Choice)

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Question 46

The lower limit on value of a call option is:

(Multiple Choice)

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Question 47

If a $1,000 convertible bond has a conversion ratio of 50 and the firm's equity is currently selling for $22 per share, then the:

(Multiple Choice)

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Question 48

What is the payoff to buyers and sellers of call and put options?

(Essay)

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Question 49

Generalize the formulas for determining the value of the following four option types: buying a call, buying a put, writing a call, writing a put.

(Essay)

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Question 50

As a stock's market price increases, the value of its call option will increase also.

(True/False)

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Question 51

Determine the payoff and profits for a call option costing $18 with an exercise price of $180, and a stock price (at expiration) with a value of $155.

(Essay)

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Question 52

When the stock price is very high compared to the exercise price, the call option premium approximates the difference between the stock price and strike price.

(True/False)

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Question 53

The value of a call option increases as the strike price increases.

(True/False)

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Question 54

An investor can create a straddle position by doing the following:

(Multiple Choice)

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Question 55

Why should a convertible bond always be valued at more than its bond value or its conversion value up until maturity?

(Multiple Choice)

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Question 56

Which is the best definition of a warrant?

(Multiple Choice)

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Question 57

What is the minimum value of the call option on a convertible bond with a conversion ratio of 30 if the bond offers a 9% coupon, has 10 years until maturity and market interest rates are 9% for comparable bonds? The stock is currently priced at 35.

(Multiple Choice)

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Question 58

The value of a callable bond equals the value of a straight bond:

(Multiple Choice)

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Question 59

Which is the best definition of a put option?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 128

Exam 25: Options

Recently you bought a call and a put option on a stock with a common exercise price of $75.The call premium was $5 and the put premium was $3.You will make money from this position if the stock price is:

Define and briefly explain the relationship between value of a call option and the following five factors: Stock price, exercise price, interest rate, time to expiration, volatility of stock price.

What is the option buyer's total profit or loss per share if a call option is purchased for a $5 premium, has a $50 exercise price, and the stock is valued at $53 at expiration?

Why would bondholders be willing to pay more for bonds that contain warrants?

How much must the stock be worth at expiration in order for a call holder to break even if the exercise price is $50 and the call premium was $4?

The lower limit on value of a call option is:

If a $1,000 convertible bond has a conversion ratio of 50 and the firm's equity is currently selling for $22 per share, then the:

What is the payoff to buyers and sellers of call and put options?

Generalize the formulas for determining the value of the following four option types: buying a call, buying a put, writing a call, writing a put.

As a stock's market price increases, the value of its call option will increase also.

Determine the payoff and profits for a call option costing $18 with an exercise price of $180, and a stock price (at expiration) with a value of $155.

When the stock price is very high compared to the exercise price, the call option premium approximates the difference between the stock price and strike price.

The value of a call option increases as the strike price increases.

An investor can create a straddle position by doing the following:

Why should a convertible bond always be valued at more than its bond value or its conversion value up until maturity?

Which is the best definition of a warrant?

What is the minimum value of the call option on a convertible bond with a conversion ratio of 30 if the bond offers a 9% coupon, has 10 years until maturity and market interest rates are 9% for comparable bonds? The stock is currently priced at 35.

The value of a callable bond equals the value of a straight bond:

Which is the best definition of a put option?

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