Exam 24: Options and Corporate Finance

You own eight call option contracts on Swift Water Tours stock with a strike price of $15.When you purchased the shares the option price was $0.30 and the stock price was $15.25.What is the total intrinsic value of these options if the stock is currently selling for $16.08 a share?

Alicia owns a $1,000 face value bond that can be converted into 20 shares of AB Limited stock.Which one of the following terms refers to these 20 shares?

You sold one call option contract with a strike price of $55 when the option was quoted at $0.80.The option expires today when the value of the underlying stock is $53.70.Ignoring trading costs and taxes,what is the net profit or loss on this investment?

Mark owns both a March $20 put and a March $20 call on Alpha stock.Which one of the following statements correctly relates to Mark's position? Ignore taxes and transaction costs.

A bond with 10 detachable warrants has just been offered for sale at $1,000.The bond matures in 12 years and has an annual coupon of $80.Each warrant gives the owner the right to purchase two shares of stock in the company at $14 per share.Ordinary bonds (with no warrants)of similar quality are priced to yield 11 percent.What is the value of one warrant?

Three months ago,Toy Town introduced a new toy for pre-school children.The store expected this toy to be an instant success and a fast moving item.To their surprise,children have zero interest in this toy so sales have been abysmal.Which one of the following options should Toy Town consider in respect to this toy?

You own one call option with an exercise price of $40 on S'more Good stock.The stock is currently selling for $41 a share but is expected to sell for either $37 or $43 a share in one year.The risk-free rate of return is 4.25 percent and the inflation rate is 3.6 percent.What is the current call option price if the option expires one year from now?

T-bills currently yield 6.3 percent.Stock in Pinta Manufacturing is currently selling for $46 per share.There is no possibility that the stock will be worth less than $39 per share in one year.What is the value of a call option on this stock if the exercise price is $24 per share?

Which one of the following describes the maximum value of a call option?

Lucas Enterprises recently opted to open a new retail outlet.If the outlet outperforms the expectations,the manager can opt to increase the store's size.If it underperforms,the manager can opt to close the store.These choices that the manager has been given are called:

You currently own a one-year call option on Rail Company,Inc.,stock.The current stock price is $52.75 and the risk-free rate of return is 4.25 percent.Your option has a strike price of $50 and you assume the option will finish in the money.What is the current value of your call option?

What is the cost of two November $25 put option contracts on Dove stock given the following price quotes?

Brad purchased an option that he can only exercise on the final day of the option period.Which type of option did he purchase?

Which one of the following statements related to warrants is correct?

Employee stock options are primarily designed to do which one of the following?

What is the intrinsic value of the November $25 call on Dove stock?

You recently purchased three put option contracts on Guillepsi stock with an exercise price of $42.50.What is the total intrinsic value of these contracts if the stock is currently selling for $45 a share?

Travis owns both a September $30 call and a September $30 put.If the call finishes at-the-money,then the put will:

The maximum value of a convertible bond is theoretically:

Employee stock options: