Question 1

Which one of the following correctly defines the range of time values for a put option?

Accepted Answer

A)  $0 to +$1 
B)  -$1 to +$1 
C)  ≤ $0 
D)  ≥ $0 
E)  1 $0 
A)  $0 to +$1 
B)  -$1 to +$1 
C)  ≤ $0 
D)  ≥ $0 
E)  1 $0

Question 2

Which of the following has the obligation to sell a stock at the strike price when an option is exercised?

Accepted Answer

A)  call holder 
B)  call writer 
C)  put holder 
D)  put writer 
E)  call holder and put writer 
A)  call holder 
B)  call writer 
C)  put holder 
D)  put writer 
E)  call holder and put writer

Question 3

Which one of the following is defined as the price at which an option will be exercised?

Accepted Answer

A)  straddle 
B)  spread 
C)  strike 
D)  market 
E)  underlying 
A)  straddle 
B)  spread 
C)  strike 
D)  market 
E)  underlying

Question 4

A decrease in which one of the following will increase the intrinsic value of a put option?

Accepted Answer

A)  strike price 
B)  exercise price 
C)  option premium 
D)  time value 
E)  underlying stock price 
A)  strike price 
B)  exercise price 
C)  option premium 
D)  time value 
E)  underlying stock price

Question 5

You are buying the June call on General Electric stock at $0.19.What amount will you pay per share if you decide to exercise this option?

Accepted Answer

A)  $32.50 
B)  $32.69 
C)  $33.81 
D)  $34.00 
E)  $34.19 
A)  $32.50 
B)  $32.69 
C)  $33.81 
D)  $34.00 
E)  $34.19

Question 6

A stock is currently selling for $26.50.A 3-month put option with a strike price of $30 has an option premium of $4.05.The risk-free rate is 2.5 percent and the market rate is 9.75 percent.What is the option premium on a 2-month call with a $30 strike price? Assume the options are European style.

Accepted Answer

A)  $0.00 
B)  $0.33 
C)  $0.41 
D)  $0.67 
E)  $0.73 
A)  $0.00 
B)  $0.33 
C)  $0.41 
D)  $0.67 
E)  $0.73

Question 7

A call option with 1 month to expiration currently sells for $0.70.A put option with the same expiration sells for $1.10.The options are European style.The risk-free rate is 3 percent and the strike price of both options is $18.00.What is the current stock price?

Accepted Answer

A)  $16.87 
B)  $17.06 
C)  $17.29 
D)  $17.56 
E)  $17.86 
A)  $16.87 
B)  $17.06 
C)  $17.29 
D)  $17.56 
E)  $17.86

Question 8

You own 4 put option contracts on ALZ stock.The contracts have a $17.50 strike price and you paid an option premium of $0.40.What is the break-even stock price?

Accepted Answer

A)  $17.10 
B)  $17.30 
C)  $17.50 
D)  $17.70 
E)  $17.90 
A)  $17.10 
B)  $17.30 
C)  $17.50 
D)  $17.70 
E)  $17.90

Question 9

The maximum:

Accepted Answer

A)  profit from buying a put is the stock price. 
B)  loss from writing a put is the option premium. 
C)  profit from writing a call is the strike price. 
D)  loss from buying a call is $0. 
E)  profit from writing a put is the option premium. 
A)  profit from buying a put is the stock price. 
B)  loss from writing a put is the option premium. 
C)  profit from writing a call is the strike price. 
D)  loss from buying a call is $0. 
E)  profit from writing a put is the option premium.

Question 10

You currently own 200 shares of Amazon stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?

Accepted Answer

A)  covered call 
B)  naked call 
C)  protective put 
D)  bear spread 
E)  straddle 
A)  covered call 
B)  naked call 
C)  protective put 
D)  bear spread 
E)  straddle

Question 11

You purchased 6 call options with a $40 strike price at a total cost of $150.On the expiration date,the underlying stock was priced at $39.20.What is the percentage return on your investment?

Accepted Answer

A)  -420 percent 
B)  -100 percent 
C)  68.75 percent 
D)  2.02 percent 
E)  220 percent 
A)  -420 percent 
B)  -100 percent 
C)  68.75 percent 
D)  2.02 percent 
E)  220 percent

Question 12

By definition,stock index options would include an option on which one of the following underlying assets?

Accepted Answer

A)  gold 
B)  corn 
C)  U.S. dollar 
D)  S&P 500 
E)  U.S. Treasury bill 
A)  gold 
B)  corn 
C)  U.S. dollar 
D)  S&P 500 
E)  U.S. Treasury bill

Question 13

A short straddle:

Accepted Answer

A)  involves exercising two or more options simultaneously. 
B)  is the purchase of both a put and a call on the same underlying asset. 
C)  obtains its maximum profit when the underlying stock price is equal to the strike price. 
D)  involves writing a call on shares of stock you currently own. 
E)  is a highly bullish strategy. 
A)  involves exercising two or more options simultaneously. 
B)  is the purchase of both a put and a call on the same underlying asset. 
C)  obtains its maximum profit when the underlying stock price is equal to the strike price. 
D)  involves writing a call on shares of stock you currently own. 
E)  is a highly bullish strategy.

Question 14

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50.The option premium was $0.65.At expiration,the stock was valued at $44.90 a share.What is her percentage return?

Accepted Answer

A)  -100 percent 
B)  0 percent 
C)  5.47 percent 
D)  32.82 percent 
E)  300 percent 
A)  -100 percent 
B)  0 percent 
C)  5.47 percent 
D)  32.82 percent 
E)  300 percent

Question 15

The change in the option symbol quotation system was driven by which of the following?
I.Advances in technology
II.Increase in the number and type of option products
III.Difficulty in applying the old system to NASDAQ stocks
IV.Difficulty in applying the system to complicated option products

Accepted Answer

A)  I, II, III, and IV 
B)  II, III, and IV 
C)  I, II, and IV 
D)  II and III 
E)  I, II and III 
A)  I, II, III, and IV 
B)  II, III, and IV 
C)  I, II, and IV 
D)  II and III 
E)  I, II and III

Question 16

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 17

A 3-month put has a strike price of $45.00 and an option premium of $0.80.The underlying stock is selling for $45.10 per share.What is the time value of the put?

Accepted Answer

A)  $0.00 
B)  $0.60 
C)  $0.90 
D)  $1.60 
E)  $1.90 
A)  $0.00 
B)  $0.60 
C)  $0.90 
D)  $1.60 
E)  $1.90

Question 18

Josh owns 2 call options on Foster Glass stock.The exercise price is $47.50 and the stock price at expiration is $49.01.What is the total payoff on the option contracts?

Accepted Answer

A)  -$0.00 
B)  -$3.02 
C)  $3.02 
D)  $30.20 
E)  $302.00 
A)  -$0.00 
B)  -$3.02 
C)  $3.02 
D)  $30.20 
E)  $302.00

Question 19

A call option has a premium of $1.95,a strike price of $45,and 3 months to expiration.The current stock price is $42.20.The stock will pay a $1.15 dividend in one month.The risk-free rate is 2.5 percent.What is the premium on a 3-month put with a strike price of $45? Assume the options are European style.

Accepted Answer

A)  $2.08 
B)  $2.15 
C)  $3.32 
D)  $4.12 
E)  $5.62 
A)  $2.08 
B)  $2.15 
C)  $3.32 
D)  $4.12 
E)  $5.62

Question 20

A call option grants its owner which one of the following?

Accepted Answer

A)  right to buy 
B)  obligation to buy 
C)  right to sell 
D)  obligation to sell 
E)  choice to either buy or sell 
A)  right to buy 
B)  obligation to buy 
C)  right to sell 
D)  obligation to sell 
E)  choice to either buy or sell

Which one of the following correctly defines the range of time values for a put option?

Which of the following has the obligation to sell a stock at the strike price when an option is exercised?

Which one of the following is defined as the price at which an option will be exercised?

A decrease in which one of the following will increase the intrinsic value of a put option?

You are buying the June call on General Electric stock at $0.19.What amount will you pay per share if you decide to exercise this option?

A stock is currently selling for $26.50.A 3-month put option with a strike price of $30 has an option premium of $4.05.The risk-free rate is 2.5 percent and the market rate is 9.75 percent.What is the option premium on a 2-month call with a $30 strike price? Assume the options are European style.

A call option with 1 month to expiration currently sells for $0.70.A put option with the same expiration sells for $1.10.The options are European style.The risk-free rate is 3 percent and the strike price of both options is $18.00.What is the current stock price?

You own 4 put option contracts on ALZ stock.The contracts have a $17.50 strike price and you paid an option premium of $0.40.What is the break-even stock price?

The maximum:

You currently own 200 shares of Amazon stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?

You purchased 6 call options with a $40 strike price at a total cost of $150.On the expiration date,the underlying stock was priced at $39.20.What is the percentage return on your investment?

By definition,stock index options would include an option on which one of the following underlying assets?

A short straddle:

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50.The option premium was $0.65.At expiration,the stock was valued at $44.90 a share.What is her percentage return?

The change in the option symbol quotation system was driven by which of the following? I.Advances in technology II.Increase in the number and type of option products III.Difficulty in applying the old system to NASDAQ stocks IV.Difficulty in applying the system to complicated option products

Which one of the following options is in-the-money?

A 3-month put has a strike price of $45.00 and an option premium of $0.80.The underlying stock is selling for $45.10 per share.What is the time value of the put?

Josh owns 2 call options on Foster Glass stock.The exercise price is $47.50 and the stock price at expiration is $49.01.What is the total payoff on the option contracts?

A call option grants its owner which one of the following?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

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

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 15: Stock Options

Which one of the following correctly defines the range of time values for a put option?

Which of the following has the obligation to sell a stock at the strike price when an option is exercised?

Which one of the following is defined as the price at which an option will be exercised?

A decrease in which one of the following will increase the intrinsic value of a put option?

You are buying the June call on General Electric stock at $0.19.What amount will you pay per share if you decide to exercise this option?

A stock is currently selling for $26.50.A 3-month put option with a strike price of $30 has an option premium of $4.05.The risk-free rate is 2.5 percent and the market rate is 9.75 percent.What is the option premium on a 2-month call with a $30 strike price? Assume the options are European style.

A call option with 1 month to expiration currently sells for $0.70.A put option with the same expiration sells for $1.10.The options are European style.The risk-free rate is 3 percent and the strike price of both options is $18.00.What is the current stock price?

You own 4 put option contracts on ALZ stock.The contracts have a $17.50 strike price and you paid an option premium of $0.40.What is the break-even stock price?

The maximum:

You currently own 200 shares of Amazon stock.If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?

You purchased 6 call options with a $40 strike price at a total cost of $150.On the expiration date,the underlying stock was priced at $39.20.What is the percentage return on your investment?

By definition,stock index options would include an option on which one of the following underlying assets?

A short straddle:

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50.The option premium was $0.65.At expiration,the stock was valued at $44.90 a share.What is her percentage return?

The change in the option symbol quotation system was driven by which of the following? I.Advances in technology II.Increase in the number and type of option products III.Difficulty in applying the old system to NASDAQ stocks IV.Difficulty in applying the system to complicated option products

Which one of the following options is in-the-money?

A 3-month put has a strike price of $45.00 and an option premium of $0.80.The underlying stock is selling for $45.10 per share.What is the time value of the put?

Josh owns 2 call options on Foster Glass stock.The exercise price is $47.50 and the stock price at expiration is $49.01.What is the total payoff on the option contracts?

A call option grants its owner which one of the following?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

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

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters