Exam 16: Option Valuation

An increase in which two of the following will have a negative effect on the value of a put option? I.risk-free interest rate II.time to option maturity III.underlying stock price IV.option strike price

(Multiple Choice)

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Question 41

What is the put option premium given the following information?

(Multiple Choice)

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Question 42

You have an equity portfolio valued at $1.55 million that has a beta of 1.21.You have decided to hedge this portfolio using SPX call option contracts.The S&P 500 index is currently 1457.The option delta is .6435.How many option contracts must you write to effectively hedge your portfolio?

(Multiple Choice)

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Question 43

A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of .9 each period over the next two periods.The risk-free rate of interest is 4.5 percent.What is the current value of a call option with a strike price of $20?

(Multiple Choice)

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Question 44

You own 4,800 shares of a stock that is currently priced at $34 a share.Given this price,the option delta for a $30 call option on this stock is .955.How many $30 call option contracts do you need to hedge against a -$1 change in the price of the stock?

(Multiple Choice)

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Question 45

VIX represents the volatility index on which one of the following?

(Multiple Choice)

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Question 46

Which of the following will result from a decrease in an option's strike price? I.increase in call option price II.decrease in call option price III.increase in put option price IV.decrease in put option price

(Multiple Choice)

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Question 47

Create a stock price tree for three periods for a stock that is currently valued at $10 a share.The up amount per period is 1.15 and the down amount per period is .90.Show all dollar amounts to 3 decimal places.

(Short Answer)

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Question 48

What is the call option premium given the following information?

(Multiple Choice)

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Question 49

A 6-month call option on ABC stock is priced at $3.60.The call option delta is 0.76.How will the approximate call option price be computed if the underlying stock price increases by $1?

(Multiple Choice)

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Question 50

A stock is currently priced at $22 a share while the $30 put option is priced at $5.22.The put option delta is -.25.What is the approximate put price if the stock increases in value to $25?

(Multiple Choice)

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Question 51

A stock with a current price of $32 will either move up to $40.00 or down to $30 over the next period.The risk-free rate of interest is 3 percent.What is the value of a call option with a strike price of $35?

(Multiple Choice)

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Question 52

You own shares of AZT stock.Which of the following strategies can you use to hedge your risk associated with a price decrease in AZT stock? I.buy call options II.write call options III.buy put options IV.write put options

(Multiple Choice)

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Question 53

Delta measures the dollar impact of a change in which one of the following on the value of a stock option?

(Multiple Choice)

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Question 54

What is the call option premium given the following information?

(Multiple Choice)

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Question 55

The S&P 500 volatility index is the _ while the NASDAQ 100 volatility index is the _.

(Multiple Choice)

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Question 56

Which one of the following situations will produce the highest put price,all else constant? Assume the options are all in-the-money.

(Multiple Choice)

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Question 57

You have determined that you need -1,589 call options to hedge your stock portfolio.What should you do based on this information?

(Multiple Choice)

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Question 58

Which one of the following statements concerning the relationship between time to option maturity and call and put prices is correct?

(Multiple Choice)

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Question 59

Which two of the following have the greatest effect on stock option prices? I.volatility of underlying stock price II.time to option maturity III.underlying stock price IV.option strike price

(Multiple Choice)

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Question 60

Showing 41 - 60 of 72

An increase in which two of the following will have a negative effect on the value of a put option? I.risk-free interest rate II.time to option maturity III.underlying stock price IV.option strike price

What is the put option premium given the following information?

You have an equity portfolio valued at $1.55 million that has a beta of 1.21.You have decided to hedge this portfolio using SPX call option contracts.The S&P 500 index is currently 1457.The option delta is .6435.How many option contracts must you write to effectively hedge your portfolio?

A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of .9 each period over the next two periods.The risk-free rate of interest is 4.5 percent.What is the current value of a call option with a strike price of $20?

You own 4,800 shares of a stock that is currently priced at $34 a share.Given this price,the option delta for a $30 call option on this stock is .955.How many $30 call option contracts do you need to hedge against a -$1 change in the price of the stock?

VIX represents the volatility index on which one of the following?

Which of the following will result from a decrease in an option's strike price? I.increase in call option price II.decrease in call option price III.increase in put option price IV.decrease in put option price

Create a stock price tree for three periods for a stock that is currently valued at $10 a share.The up amount per period is 1.15 and the down amount per period is .90.Show all dollar amounts to 3 decimal places.

What is the call option premium given the following information?

A 6-month call option on ABC stock is priced at $3.60.The call option delta is 0.76.How will the approximate call option price be computed if the underlying stock price increases by $1?

A stock is currently priced at $22 a share while the $30 put option is priced at $5.22.The put option delta is -.25.What is the approximate put price if the stock increases in value to $25?

A stock with a current price of $32 will either move up to $40.00 or down to $30 over the next period.The risk-free rate of interest is 3 percent.What is the value of a call option with a strike price of $35?

You own shares of AZT stock.Which of the following strategies can you use to hedge your risk associated with a price decrease in AZT stock? I.buy call options II.write call options III.buy put options IV.write put options

Delta measures the dollar impact of a change in which one of the following on the value of a stock option?

What is the call option premium given the following information?

The S&P 500 volatility index is the _ while the NASDAQ 100 volatility index is the _.

Which one of the following situations will produce the highest put price,all else constant? Assume the options are all in-the-money.

You have determined that you need -1,589 call options to hedge your stock portfolio.What should you do based on this information?

Which one of the following statements concerning the relationship between time to option maturity and call and put prices is correct?

Which two of the following have the greatest effect on stock option prices? I.volatility of underlying stock price II.time to option maturity III.underlying stock price IV.option strike price

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

Stock Options

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 16: Option Valuation

An increase in which two of the following will have a negative effect on the value of a put option? I.risk-free interest rate II.time to option maturity III.underlying stock price IV.option strike price

What is the put option premium given the following information?

You have an equity portfolio valued at $1.55 million that has a beta of 1.21.You have decided to hedge this portfolio using SPX call option contracts.The S&P 500 index is currently 1457.The option delta is .6435.How many option contracts must you write to effectively hedge your portfolio?

A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of .9 each period over the next two periods.The risk-free rate of interest is 4.5 percent.What is the current value of a call option with a strike price of $20?

You own 4,800 shares of a stock that is currently priced at $34 a share.Given this price,the option delta for a $30 call option on this stock is .955.How many $30 call option contracts do you need to hedge against a -$1 change in the price of the stock?

VIX represents the volatility index on which one of the following?

Which of the following will result from a decrease in an option's strike price? I.increase in call option price II.decrease in call option price III.increase in put option price IV.decrease in put option price

Create a stock price tree for three periods for a stock that is currently valued at $10 a share.The up amount per period is 1.15 and the down amount per period is .90.Show all dollar amounts to 3 decimal places.

What is the call option premium given the following information?

A 6-month call option on ABC stock is priced at $3.60.The call option delta is 0.76.How will the approximate call option price be computed if the underlying stock price increases by $1?

A stock is currently priced at $22 a share while the $30 put option is priced at $5.22.The put option delta is -.25.What is the approximate put price if the stock increases in value to $25?

A stock with a current price of $32 will either move up to $40.00 or down to $30 over the next period.The risk-free rate of interest is 3 percent.What is the value of a call option with a strike price of $35?

You own shares of AZT stock.Which of the following strategies can you use to hedge your risk associated with a price decrease in AZT stock? I.buy call options II.write call options III.buy put options IV.write put options

Delta measures the dollar impact of a change in which one of the following on the value of a stock option?

What is the call option premium given the following information?

The S&P 500 volatility index is the _____ while the NASDAQ 100 volatility index is the _____.

Which one of the following situations will produce the highest put price,all else constant? Assume the options are all in-the-money.

You have determined that you need -1,589 call options to hedge your stock portfolio.What should you do based on this information?

Which one of the following statements concerning the relationship between time to option maturity and call and put prices is correct?

Which two of the following have the greatest effect on stock option prices? I.volatility of underlying stock price II.time to option maturity III.underlying stock price IV.option strike price

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

Stock Options

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

The S&P 500 volatility index is the _ while the NASDAQ 100 volatility index is the _.