Question 1

The relationship between a change in the price of a stock and the related change in the price of the call on that stock is referred to as the option

Accepted Answer

A) vega. 
B) theta. 
C) rho. 
D) gamma. 
E) delta. 
A) vega. 
B) theta. 
C) rho. 
D) gamma. 
E) delta.

Question 2

The market price of Wild Ride stock has been very volatile,and you think this volatility will continue for a few weeks.Thus,you decide to purchase a 1-month call option contract with a strike price of $45 and an option price of $1.15.You also purchase a 1-month put option on the stock with a strike price of $50 and an option price of $.95.What will be your total profit or loss on all the transactions related to these option positions if the stock price is $44.40 on the day the options expire?

Accepted Answer

A) $315 
B) $290 
C) −$210 
D) $350 
E) −$105 
A) $315 
B) $290 
C) −$210 
D) $350 
E) −$105

Question 3

Stock option quotes are

Accepted Answer

A) quoted as the price for each 100-share contract. 
B) quoted on a per-share basis with each contract covering 1,000 shares. 
C) quoted on a per-share basis with each contract covering a single share. 
D) based on a 1,000-share contract and quoted as a price per contract. 
E) based on a 100-share contract with the quote stated on a per-share basis. 
A) quoted as the price for each 100-share contract. 
B) quoted on a per-share basis with each contract covering 1,000 shares. 
C) quoted on a per-share basis with each contract covering a single share. 
D) based on a 1,000-share contract and quoted as a price per contract. 
E) based on a 100-share contract with the quote stated on a per-share basis.

Question 4

A 1-month $15 call option on BRU stock is priced at $1.45 while the 1-month $20 put option is priced at $3.45.Which one of these is the best estimate of the current price of one share of BRU stock?

Accepted Answer

A) $14.50 
B) $16.50 
C) $15.00 
D) $16.00 
E) $15.50 
A) $14.50 
B) $16.50 
C) $15.00 
D) $16.00 
E) $15.50

Question 5

The 3-month options on XYZ stock have a strike price of $35 while the stock price is $43.The risk-free rate is 3.15 percent,the standard deviation is 27 percent,N(d1)is 0.95060 and N(d2)is 0.93520.What is the call price?

Accepted Answer

A) $4.14 
B) $4.72 
C) $8.40 
D) $6.56 
E) $5.64 
A) $4.14 
B) $4.72 
C) $8.40 
D) $6.56 
E) $5.64

Question 6

Pure Aqua stock is selling for $37.28 a share.One $37.50 call is valued at $1.02 and one $35 put is valued at $.13.What is the value of four call option contracts?

Accepted Answer

A) $4.08 
B) $2.96 
C) $296.00 
D) $408.00 
E) $0 
A) $4.08 
B) $2.96 
C) $296.00 
D) $408.00 
E) $0

Question 7

Wilt's has a stock price of $38 a share.The 9-month options have a strike price of $45.The risk-free rate is 3.2 percent,the standard deviation is 21 percent,N(d1)is 0.23985 and N(d2)is 0.18710.What is the call price?

Accepted Answer

A) $)68 
B) $)89 
C) $1.03 
D) $1.21 
E) $1.17 
A) $)68 
B) $)89 
C) $1.03 
D) $1.21 
E) $1.17

Question 8

Benny's is reviewing a $462,000 project that is expected to increase the firm's equity by $141,300 What is the project's delta?

Accepted Answer

A) 0)2889 
B) 0)3058 
C) 0)2948 
D) 0)3103 
E) 0)2701 
A) 0)2889 
B) 0)3058 
C) 0)2948 
D) 0)3103 
E) 0)2701

Question 9

Hilltop stock has a current market price of $58.10 a share.The 1-year $55 call is priced at $3.75 while the 1-year $55 put is priced at $.42.What is the risk-free rate of return?

Accepted Answer

A) .42% 
B) .87% 
C) .48% 
D) .76% 
E) 1.09% 
A) .42% 
B) .87% 
C) .48% 
D) .76% 
E) 1.09%

Question 10

Which one of the following will cause the value of a call to decrease?

Accepted Answer

A) Lowering the risk level of the underlying security 
B) Increasing the time to expiration 
C) Increasing the risk-free rate 
D) Lowering the exercise price 
E) Increasing the stock price 
A) Lowering the risk level of the underlying security 
B) Increasing the time to expiration 
C) Increasing the risk-free rate 
D) Lowering the exercise price 
E) Increasing the stock price

Question 11

The intrinsic value of a put is equal to the:

Accepted Answer

A) lesser of the stock price minus the exercise price or zero. 
B) greater of the strike price minus the stock price or zero. 
C) lesser of the stock price or zero. 
D) lesser of the strike price or the stock price. 
E) greater of the stock price minus the exercise price or zero. 
A) lesser of the stock price minus the exercise price or zero. 
B) greater of the strike price minus the stock price or zero. 
C) lesser of the stock price or zero. 
D) lesser of the strike price or the stock price. 
E) greater of the stock price minus the exercise price or zero.

Question 12

Which one of these will increase both the value of a call and the value of a put?

Accepted Answer

A) Decrease in the exercise price 
B) Increase in the stock price 
C) Decrease in the interest rate 
D) Increase in stock volatility 
E) Decrease in time to expiration 
A) Decrease in the exercise price 
B) Increase in the stock price 
C) Decrease in the interest rate 
D) Increase in stock volatility 
E) Decrease in time to expiration

Question 13

If you express a firm in terms of put options,the

Accepted Answer

A) current value of the firm is the exercise price. 
B) option will always be in the money. 
C) stockholders will be considered as the firm's owners. 
D) bondholders determine whether or not the option will be exercised. 
E) bondholders are the buyers of the put. 
A) current value of the firm is the exercise price. 
B) option will always be in the money. 
C) stockholders will be considered as the firm's owners. 
D) bondholders determine whether or not the option will be exercised. 
E) bondholders are the buyers of the put.

Question 14

The relationship between the prices of the underlying stock,a call option,a put option,and a riskless asset is referred to as the ________ relationship.

Accepted Answer

A) covered call 
B) put-call parity 
C) protective put 
D) straddle 
E) strangle 
A) covered call 
B) put-call parity 
C) protective put 
D) straddle 
E) strangle

Question 15

IOU stock is selling for $39.40 a share.The 6-month $40 call costs $1.20.Risk-free assets are currently returning 0.15 percent per month.What is the price of the 6-month $40 put?

Accepted Answer

A) $1.74 
B) $)96 
C) $1.03 
D) $1.21 
E) $1.44 
A) $1.74 
B) $)96 
C) $1.03 
D) $1.21 
E) $1.44

Question 16

The fixed price in an option contract at which the owner can buy or sell the underlying asset is called the option's

Accepted Answer

A) opening price. 
B) intrinsic value. 
C) market price. 
D) strike price. 
E) time value. 
A) opening price. 
B) intrinsic value. 
C) market price. 
D) strike price. 
E) time value.

Question 17

Valley Foods has a stock price of $34.92 a share.The 3-month options have a strike price of $35.The risk-free rate is 4.2 percent,the standard deviation is 38 percent,N(d1)is 0.55497 and N(d2)is 0.47935.What is the call price?

Accepted Answer

A) $2.03 
B) $2.78 
C) $2.69 
D) $2.11 
E) $2.47 
A) $2.03 
B) $2.78 
C) $2.69 
D) $2.11 
E) $2.47

Question 18

Jeanette just purchased 100 shares of HE stock along with a $30 put option contract on HE.During the life of the option contract,the minimum value of her combined holdings will be ________ and the maximum value will be ________.

Accepted Answer

A) $0;$1,500. 
B) $0;$3,000. 
C) $1,500;$3,000 
D) $0;Unlimited 
E) $3,000;Unlimited 
A) $0;$1,500. 
B) $0;$3,000. 
C) $1,500;$3,000 
D) $0;Unlimited 
E) $3,000;Unlimited

Question 19

A 4-month ABC $30 call is priced at $1.50 while the 4-month ABC put is priced at $2.20.Risk-free assets are currently returning 0.25 percent per month.What is the price of ABC stock?

Accepted Answer

A) $29 
B) $27 
C) $31 
D) $34 
E) $30 
A) $29 
B) $27 
C) $31 
D) $34 
E) $30

Question 20

High Tower stock is selling for $32.08 a share,the $30 puts are priced at $.62,and the $30 calls are priced at $2.36.How much will you receive if you write twenty $30 put option contracts?

Accepted Answer

A) $1,080 
B) $1,240 
C) $10.80 
D) $12.40 
E) $4,720 
A) $1,080 
B) $1,240 
C) $10.80 
D) $12.40 
E) $4,720

The relationship between a change in the price of a stock and the related change in the price of the call on that stock is referred to as the option

Stock option quotes are

A 1-month $15 call option on BRU stock is priced at $1.45 while the 1-month $20 put option is priced at $3.45.Which one of these is the best estimate of the current price of one share of BRU stock?

The 3-month options on XYZ stock have a strike price of $35 while the stock price is $43.The risk-free rate is 3.15 percent,the standard deviation is 27 percent,N(d₁)is 0.95060 and N(d₂)is 0.93520.What is the call price?

Pure Aqua stock is selling for $37.28 a share.One $37.50 call is valued at $1.02 and one $35 put is valued at $.13.What is the value of four call option contracts?

Wilt's has a stock price of $38 a share.The 9-month options have a strike price of $45.The risk-free rate is 3.2 percent,the standard deviation is 21 percent,N(d₁)is 0.23985 and N(d₂)is 0.18710.What is the call price?

Benny's is reviewing a $462,000 project that is expected to increase the firm's equity by $141,300 What is the project's delta?

Hilltop stock has a current market price of $58.10 a share.The 1-year $55 call is priced at $3.75 while the 1-year $55 put is priced at $.42.What is the risk-free rate of return?

Which one of the following will cause the value of a call to decrease?

The intrinsic value of a put is equal to the:

Which one of these will increase both the value of a call and the value of a put?

If you express a firm in terms of put options,the

The relationship between the prices of the underlying stock,a call option,a put option,and a riskless asset is referred to as the ________ relationship.

IOU stock is selling for $39.40 a share.The 6-month $40 call costs $1.20.Risk-free assets are currently returning 0.15 percent per month.What is the price of the 6-month $40 put?

The fixed price in an option contract at which the owner can buy or sell the underlying asset is called the option's

Valley Foods has a stock price of $34.92 a share.The 3-month options have a strike price of $35.The risk-free rate is 4.2 percent,the standard deviation is 38 percent,N(d₁)is 0.55497 and N(d₂)is 0.47935.What is the call price?

Jeanette just purchased 100 shares of HE stock along with a $30 put option contract on HE.During the life of the option contract,the minimum value of her combined holdings will be and the maximum value will be .

A 4-month ABC $30 call is priced at $1.50 while the 4-month ABC put is priced at $2.20.Risk-free assets are currently returning 0.25 percent per month.What is the price of ABC stock?

High Tower stock is selling for $32.08 a share,the $30 puts are priced at $.62,and the $30 calls are priced at $2.36.How much will you receive if you write twenty $30 put option contracts?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

Exam 17: Options Amcq Corporate Finance

The relationship between a change in the price of a stock and the related change in the price of the call on that stock is referred to as the option

Stock option quotes are

A 1-month $15 call option on BRU stock is priced at $1.45 while the 1-month $20 put option is priced at $3.45.Which one of these is the best estimate of the current price of one share of BRU stock?

The 3-month options on XYZ stock have a strike price of $35 while the stock price is $43.The risk-free rate is 3.15 percent,the standard deviation is 27 percent,N(d1)is 0.95060 and N(d2)is 0.93520.What is the call price?

Pure Aqua stock is selling for $37.28 a share.One $37.50 call is valued at $1.02 and one $35 put is valued at $.13.What is the value of four call option contracts?

Wilt's has a stock price of $38 a share.The 9-month options have a strike price of $45.The risk-free rate is 3.2 percent,the standard deviation is 21 percent,N(d1)is 0.23985 and N(d2)is 0.18710.What is the call price?

Benny's is reviewing a $462,000 project that is expected to increase the firm's equity by $141,300 What is the project's delta?

Hilltop stock has a current market price of $58.10 a share.The 1-year $55 call is priced at $3.75 while the 1-year $55 put is priced at $.42.What is the risk-free rate of return?

Which one of the following will cause the value of a call to decrease?

The intrinsic value of a put is equal to the:

Which one of these will increase both the value of a call and the value of a put?

If you express a firm in terms of put options,the

The relationship between the prices of the underlying stock,a call option,a put option,and a riskless asset is referred to as the ________ relationship.

IOU stock is selling for $39.40 a share.The 6-month $40 call costs $1.20.Risk-free assets are currently returning 0.15 percent per month.What is the price of the 6-month $40 put?

The fixed price in an option contract at which the owner can buy or sell the underlying asset is called the option's

Valley Foods has a stock price of $34.92 a share.The 3-month options have a strike price of $35.The risk-free rate is 4.2 percent,the standard deviation is 38 percent,N(d1)is 0.55497 and N(d2)is 0.47935.What is the call price?

Jeanette just purchased 100 shares of HE stock along with a $30 put option contract on HE.During the life of the option contract,the minimum value of her combined holdings will be ________ and the maximum value will be ________.

A 4-month ABC $30 call is priced at $1.50 while the 4-month ABC put is priced at $2.20.Risk-free assets are currently returning 0.25 percent per month.What is the price of ABC stock?

High Tower stock is selling for $32.08 a share,the $30 puts are priced at $.62,and the $30 calls are priced at $2.36.How much will you receive if you write twenty $30 put option contracts?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

The 3-month options on XYZ stock have a strike price of $35 while the stock price is $43.The risk-free rate is 3.15 percent,the standard deviation is 27 percent,N(d₁)is 0.95060 and N(d₂)is 0.93520.What is the call price?

Wilt's has a stock price of $38 a share.The 9-month options have a strike price of $45.The risk-free rate is 3.2 percent,the standard deviation is 21 percent,N(d₁)is 0.23985 and N(d₂)is 0.18710.What is the call price?

Valley Foods has a stock price of $34.92 a share.The 3-month options have a strike price of $35.The risk-free rate is 4.2 percent,the standard deviation is 38 percent,N(d₁)is 0.55497 and N(d₂)is 0.47935.What is the call price?

Jeanette just purchased 100 shares of HE stock along with a $30 put option contract on HE.During the life of the option contract,the minimum value of her combined holdings will be and the maximum value will be .