Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup \[\begin{array} { c c c } \text { otrike Price } & \text { Put Price } & \text { Call Price } \\ \hline\$ 32.50 & \$2.85 & \$1.65 \end{array}\] -Refer to Exhibit 22.4.A protective put is an appropriate strategy if

A) An investor wishes to generate additional income. B) An investor wished to insure against a decline in share values. C) An investor expected share prices to be volatile. D) An investor expected share prices to remain in a trading range. E) An investor expected share prices to be volatile, but was inclined to be bullish. A) An investor wishes to generate additional income. B) An investor wished to insure against a decline in share values. C) An investor expected share prices to be volatile. D) An investor expected share prices to remain in a trading range. E) An investor expected share prices to be volatile, but was inclined to be bullish.

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup \[\begin{array} { c c c } \text { otrike Price } & \text { Put Price } & \text { Call Price } \\ \hline\$ 32.50 & \$2.85 & \$1.65 \end{array}\] -Refer to Exhibit 22.4.A short straddle is an appropriate strategy if

A) An investor wishes to generate additional income. B) An investor wished to insure against a decline in share values. C) An investor expected share prices to be volatile. D) An investor expected share prices to remain in a trading range. E) An investor expected share prices to be volatile, but was inclined to be bullish. A) An investor wishes to generate additional income. B) An investor wished to insure against a decline in share values. C) An investor expected share prices to be volatile. D) An investor expected share prices to remain in a trading range. E) An investor expected share prices to be volatile, but was inclined to be bullish.

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup \[\begin{array} { c c c } \text { otrike Price } & \text { Put Price } & \text { Call Price } \\ \hline\$ 32.50 & \$2.85 & \$1.65 \end{array}\] -Refer to Exhibit 22.4.Calculate the net value of a covered call position at a stock price at expiration of $20,and a stock price at expiration of $45.

A) $6.35, $18.85 B) $29.65, $42.15 C) $21.65, $34.15 D) $8, $8 E) -$8, -$8 A) $6.35, $18.85 B) $29.65, $42.15 C) $21.65, $34.15 D) $8, $8 E) -$8, -$8

Exhibit 22.1 Use the Information Below for the Following Problem(S) $\begin{array}{|l|c|l|l|l|} \hline \text { Option Type } & & \text { Currency } &{\text { Canadian dollar }} \\ \hline \text { Contract Size } & & 50000 & {\text { Canadian dollars }} \\ \hline \text { Expiry } & & \text { April } & & \\ \hline & & & & \\ \hline \text { Strike } & \text { Call } & \text { Put } & & \\ \hline \$ 0.815 & \$ 0.0118 & & & \\ \hline \$ 0.820 & & \$ 0.0068 & & \\ \hline \end{array}$ -Refer to Exhibit 22.1.How much must an investor pay for one call option contract?

A) $680 B) $815 C) $625 D) $590 E) $340 A) $680 B) $815 C) $625 D) $590 E) $340

Exhibit 22.1 Use the Information Below for the Following Problem(S) $\begin{array}{|l|c|l|l|l|} \hline \text { Option Type } & & \text { Currency } &{\text { Canadian dollar }} \\ \hline \text { Contract Size } & & 50000 & {\text { Canadian dollars }} \\ \hline \text { Expiry } & & \text { April } & & \\ \hline & & & & \\ \hline \text { Strike } & \text { Call } & \text { Put } & & \\ \hline \$ 0.815 & \$ 0.0118 & & & \\ \hline \$ 0.820 & & \$ 0.0068 & & \\ \hline \end{array}$ -Refer to Exhibit 22.1.If the spot rate at expiration is $0.90 and the call option was purchased,what is the dollar gain or loss?

A) $0 B) $3750 gain C) $3660 gain D) $4650 loss E) $2680 loss A) $0 B) $3750 gain C) $3660 gain D) $4650 loss E) $2680 loss

Exam 22: Option Contracts

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup otrike Price Put Price Call Price \ 32.50 \2 .85 \1 .65 -Refer to Exhibit 22.4.A protective put is an appropriate strategy if

(Multiple Choice)

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Question 61

In a binomial option pricing model the initial value of the call can be determined by working backward through the tree and solving for each of the remaining intermediate option values.

(True/False)

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Question 62

Exhibit 22.5 Use the Information Below for the Following Problem(S) The information provided is relevant in the context of a one period (one year) binomial option pricing model. A stock currently trades at $50 per share, a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25% or fall by 25%. The one-year risk free rate is 2%. -Refer to Exhibit 22.5.Calculate the possible prices of the stock one year from today.

(Multiple Choice)

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Question 63

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup otrike Price Put Price Call Price \ 32.50 \2 .85 \1 .65 -Refer to Exhibit 22.4.A short straddle is an appropriate strategy if

(Multiple Choice)

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Question 64

If you were to purchase an October option with an exercise price of 50 for 8 and simultaneously sell an October option with an exercise price of 60 for 2,you would be

(Multiple Choice)

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Question 65

Exhibit 22.7 Use the Information Below for the Following Problem(S) GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00. -Refer to Exhibit 22.7.What would the net value of a long straddle position be if the stock price at expiration is $35?

(Multiple Choice)

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Question 66

The standardization of option contracts and the creation of the Options Clearing Corporation are two important results of the opening of the Chicago Board of Options Exchange.

(True/False)

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Question 67

Options can be used to

(Multiple Choice)

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Question 68

It is a violation of the securities laws to combine option contracts to achieve a customized payoff.

(True/False)

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Question 69

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup otrike Price Put Price Call Price \ 32.50 \2 .85 \1 .65 -Refer to Exhibit 22.4.Calculate the net value of a covered call position at a stock price at expiration of $20,and a stock price at expiration of $45.

(Multiple Choice)

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(67)

Question 70

Exhibit 22.7 Use the Information Below for the Following Problem(S) GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00. -Refer to Exhibit 22.7.What would the net value of a long strap position be if the stock price at expiration is $35?

(Multiple Choice)

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Question 71

The creation of the CBOE led to all the following innovations in options except

(Multiple Choice)

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Question 72

Exhibit 22.1 Use the Information Below for the Following Problem(S) Option Type Currency Canadian dollar Contract Size 50000 Canadian dollars Expiry April Strike Call Put \ 0.815 \ 0.0118 \ 0.820 \ 0.0068 -Refer to Exhibit 22.1.How much must an investor pay for one call option contract?

(Multiple Choice)

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Question 73

In a money spread,an investor would

(Multiple Choice)

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Question 74

In the Black-Scholes option pricing model,an increase in exercise price (X)will cause

(Multiple Choice)

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Question 75

Exhibit 22.3 Use the Information Below for the Following Problem(S) A stock currently trades for $130 per share. Options on the stock are available with a strike price of $125. The options expire in 10 days. The risk free rate is 3% over this time period, and the expected volatility is 0.35. -Assume that you have just sold a stock for a loss at a price of $75,for tax purposes.You still wish to maintain exposure to the sold stock.Suppose that you sell a put with a strike price of $80 and a price of $7.25.Calculate the effective price paid to repurchase the stock if the price after 35 days is $70.

(Multiple Choice)

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Question 76

The Chicago Board Options Exchange has the largest share of stock option trading.

(True/False)

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Question 77

A long strip position indicates that an investor is bullish but conservative.

(True/False)

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Question 78

Exhibit 22.1 Use the Information Below for the Following Problem(S) Option Type Currency Canadian dollar Contract Size 50000 Canadian dollars Expiry April Strike Call Put \ 0.815 \ 0.0118 \ 0.820 \ 0.0068 -Refer to Exhibit 22.1.If the spot rate at expiration is $0.90 and the call option was purchased,what is the dollar gain or loss?

(Multiple Choice)

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Question 79

Exhibit 22.6 Use the Information Below for the Following Problem(S) The following information is provided in the context of a two period (two six month periods) binomial option pricing model. A stock currently trades at $60 per share, a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15% or fall by 15% during each six month period. The one-year risk free rate is 3%. -Refer to Exhibit 22.6.Calculate the price of the call option after the stock price has already moved down in value once (Cd).

(Multiple Choice)

4.8/5

(80)

Question 80

Exam 22: Option Contracts

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup otrike Price Put Price Call Price \ 32.50 \2 .85 \1 .65 -Refer to Exhibit 22.4.A protective put is an appropriate strategy if

In a binomial option pricing model the initial value of the call can be determined by working backward through the tree and solving for each of the remaining intermediate option values.

Exhibit 22.4 Use the Information Below for the Following Problem(S) Consider the following information on put and call options for Citigroup otrike Price Put Price Call Price \ 32.50 \2 .85 \1 .65 -Refer to Exhibit 22.4.A short straddle is an appropriate strategy if

If you were to purchase an October option with an exercise price of 50 for 8 and simultaneously sell an October option with an exercise price of 60 for 2,you would be

The standardization of option contracts and the creation of the Options Clearing Corporation are two important results of the opening of the Chicago Board of Options Exchange.

Options can be used to

It is a violation of the securities laws to combine option contracts to achieve a customized payoff.

The creation of the CBOE led to all the following innovations in options except

Exhibit 22.1 Use the Information Below for the Following Problem(S) Option Type Currency Canadian dollar Contract Size 50000 Canadian dollars Expiry April Strike Call Put \ 0.815 \ 0.0118 \ 0.820 \ 0.0068 -Refer to Exhibit 22.1.How much must an investor pay for one call option contract?

In a money spread,an investor would

In the Black-Scholes option pricing model,an increase in exercise price (X)will cause

The Chicago Board Options Exchange has the largest share of stock option trading.

A long strip position indicates that an investor is bullish but conservative.

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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