Question 1

The current market price of a share of Disney stock is $60.If a call option on this stock has a strike price of $65, the call

Accepted Answer

A) is out of the money. 
B) is in the money. 
C) can be exercised profitably. 
D) is out of the money and can be exercised profitably. 
A) is out of the money. 
B) is in the money. 
C) can be exercised profitably. 
D) is out of the money and can be exercised profitably.

Question 2

The current market price of a share of a stock is $20.If a put option on this stock has a strike price of $18, the put

Accepted Answer

A) is out of the money. 
B) is in the money. 
C) sells for a higher price than if the strike price of the put option was $23. 
D) is out of the money and sells for a higher price than if the strike price of the put option was $23. 
A) is out of the money. 
B) is in the money. 
C) sells for a higher price than if the strike price of the put option was $23. 
D) is out of the money and sells for a higher price than if the strike price of the put option was $23.

Question 3

Suppose the price of a share of Google stock is $500.An April call option on Google stock has a premium of $5 and an exercise price of $500.Ignoring commissions, the holder of the call option will earn a profit if the price of the share

Accepted Answer

A) increases to $504. 
B) decreases to $490. 
C) increases to $506. 
D) decreases to $496. 
A) increases to $504. 
B) decreases to $490. 
C) increases to $506. 
D) decreases to $496.

Question 4

All of the following factors affect the price of a stock option except

Accepted Answer

A) the risk-free rate. 
B) the riskiness of the stock. 
C) the time to expiration. 
D) the expected rate of return on the stock. 
A) the risk-free rate. 
B) the riskiness of the stock. 
C) the time to expiration. 
D) the expected rate of return on the stock.

Question 5

The following price quotations on WFM were taken from the Wall Street Journal.   The premium on one WFM February 85 call contract is

Accepted Answer

A) $8.875. 
B) $887.50. 
C) $412.50. 
D) $158.00. 
A) $8.875. 
B) $887.50. 
C) $412.50. 
D) $158.00.

Question 6

Suppose that you purchased a call option on the S&P 100 Index.The option has an exercise price of 1,700, and the index is now at 1,760.What will happen when you exercise the option?

Accepted Answer

A) You will have to pay $6,000. 
B) You will receive $6,000. 
C) You will receive $1,700. 
D) You will receive $1,760. 
A) You will have to pay $6,000. 
B) You will receive $6,000. 
C) You will receive $1,700. 
D) You will receive $1,760.

Question 7

You purchased a call option for $3.45 17 days ago.The call has a strike price of $45, and the stock is now trading for $51.If you exercise the call today, what will be your holding-period return? If you do not exercise the call today and it expires, what will be your holding-period return?

Accepted Answer

A) 173.9%, -100% 
B) 73.9%, -100% 
C) 57.5%, -173.9% 
D) 73.9%, -57.5% 
A) 173.9%, -100% 
B) 73.9%, -100% 
C) 57.5%, -173.9% 
D) 73.9%, -57.5%

Question 8

A European put option allows the holder to

Accepted Answer

A) buy the underlying asset at the striking price on or before the expiration date. 
B) sell the underlying asset at the striking price on or before the expiration date. 
C) potentially benefit from a stock price increase. 
D) sell the underlying asset at the striking price on the expiration date. 
A) buy the underlying asset at the striking price on or before the expiration date. 
B) sell the underlying asset at the striking price on or before the expiration date. 
C) potentially benefit from a stock price increase. 
D) sell the underlying asset at the striking price on the expiration date.

The current market price of a share of Disney stock is $60.If a call option on this stock has a strike price of $65, the call

The current market price of a share of a stock is $20.If a put option on this stock has a strike price of $18, the put

Suppose the price of a share of Google stock is $500.An April call option on Google stock has a premium of $5 and an exercise price of $500.Ignoring commissions, the holder of the call option will earn a profit if the price of the share

All of the following factors affect the price of a stock option except

The following price quotations on WFM were taken from the Wall Street Journal. The premium on one WFM February 85 call contract is

Suppose that you purchased a call option on the S&P 100 Index.The option has an exercise price of 1,700, and the index is now at 1,760.What will happen when you exercise the option?

You purchased a call option for $3.45 17 days ago.The call has a strike price of $45, and the stock is now trading for $51.If you exercise the call today, what will be your holding-period return? If you do not exercise the call today and it expires, what will be your holding-period return?

A European put option allows the holder to

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

Exam 20: Options Markets: Introduction

The current market price of a share of Disney stock is $60.If a call option on this stock has a strike price of $65, the call

The current market price of a share of a stock is $20.If a put option on this stock has a strike price of $18, the put

Suppose the price of a share of Google stock is $500.An April call option on Google stock has a premium of $5 and an exercise price of $500.Ignoring commissions, the holder of the call option will earn a profit if the price of the share

All of the following factors affect the price of a stock option except

The following price quotations on WFM were taken from the Wall Street Journal. The premium on one WFM February 85 call contract is

Suppose that you purchased a call option on the S&P 100 Index.The option has an exercise price of 1,700, and the index is now at 1,760.What will happen when you exercise the option?

You purchased a call option for $3.45 17 days ago.The call has a strike price of $45, and the stock is now trading for $51.If you exercise the call today, what will be your holding-period return? If you do not exercise the call today and it expires, what will be your holding-period return?

A European put option allows the holder to

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters