A) the change in the value of an option for a dollar change in the price of the underlying asset. B) the change in the value of the underlying asset for a dollar change in the call price. C) the percentage change in the value of an option for a 1% change in the value of the underlying asset. D) the change in the volatility of the underlying stock price. E) None of the options are correct. A) the change in the value of an option for a dollar change in the price of the underlying asset. B) the change in the value of the underlying asset for a dollar change in the call price. C) the percentage change in the value of an option for a 1% change in the value of the underlying asset. D) the change in the volatility of the underlying stock price. E) None of the options are correct.

Exam 21: Option Valuation

A portfolio consists of 100 shares of stock and 1500 calls on that stock. If the hedge ratio for the call is 0.7, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?

(Multiple Choice)

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Question 21

The intrinsic value of an at-the-money put option is equal to

(Multiple Choice)

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Question 22

If the hedge ratio for a stock call is 0.60, the hedge ratio for a put with the same expiration date and exercise price as the call would be

(Multiple Choice)

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Question 23

Delta is defined as

(Multiple Choice)

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Question 24

All the inputs in the Black-Scholes option pricing model are directly observable except

(Multiple Choice)

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Question 25

A put option was purchased two months ago for $3.70 with an exercise price of $50. The option is exercised when the market price of the stock is $48. What is the net profit or loss to the investor?

(Multiple Choice)

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Question 26

Portfolio A consists of 600 shares of stock and 300 calls on that stock. Portfolio B consists of 685 shares of stock. The call delta is 0.3. Which portfolio has a higher dollar exposure to a change in stock price?

(Multiple Choice)

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Question 27

A hedge ratio of 0.85 implies that a hedged portfolio should consist of

(Multiple Choice)

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Question 28

The intrinsic value of an in-of-the-money call option is equal to

(Multiple Choice)

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Question 29

The time value of a call option isI) the difference between the option's price and the value it would have if it were expiring immediately.II) the same as the present value of the option's expected future cash flows.III) the difference between the option's price and its expected future value.IV) different from the usual time value of money concept.

(Multiple Choice)

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Question 30

If the hedge ratio for a stock call is 0.70, the hedge ratio for a put with the same expiration date and exercise price as the call would be

(Multiple Choice)

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Question 31

Lower dividend-payout policies have a impact on the value of the call and a impact on the value of the put compared to higher dividend-payout policies.

(Multiple Choice)

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Question 32

Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

(Multiple Choice)

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Question 33

Portfolio A consists of 400 shares of stock and 400 calls on that stock. Portfolio B consists of 500 shares of stock. The call delta is 0.5. Which portfolio has a higher dollar exposure to a change in stock price?

(Multiple Choice)

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Question 34

An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $54. The call premium is $14. What is the time value of the call?

(Multiple Choice)

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Question 35

A hedge ratio for a put is always

(Multiple Choice)

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Question 36

A $1 decrease in a call option's exercise price would result in a(n) in the call option's value of one dollar.

(Multiple Choice)

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Question 37

If the stock price increases, the price of a put option on that stock , and that of a call option .

(Multiple Choice)

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Question 38

The intrinsic value of an at-the-money call option is equal to

(Multiple Choice)

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Question 39

Which one of the following variables influences the value of call options?I) Level of interest ratesII) Time to expiration of the optionIII) Dividend yield of underlying stockIV) Stock price volatility

(Multiple Choice)

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Question 40

Showing 21 - 40 of 89

Exam 21: Option Valuation

A portfolio consists of 100 shares of stock and 1500 calls on that stock. If the hedge ratio for the call is 0.7, what would be the dollar change in the value of the portfolio in response to a $1 decline in the stock price?

The intrinsic value of an at-the-money put option is equal to

If the hedge ratio for a stock call is 0.60, the hedge ratio for a put with the same expiration date and exercise price as the call would be

Delta is defined as

All the inputs in the Black-Scholes option pricing model are directly observable except

A put option was purchased two months ago for $3.70 with an exercise price of $50. The option is exercised when the market price of the stock is $48. What is the net profit or loss to the investor?

Portfolio A consists of 600 shares of stock and 300 calls on that stock. Portfolio B consists of 685 shares of stock. The call delta is 0.3. Which portfolio has a higher dollar exposure to a change in stock price?

A hedge ratio of 0.85 implies that a hedged portfolio should consist of

The intrinsic value of an in-of-the-money call option is equal to

If the hedge ratio for a stock call is 0.70, the hedge ratio for a put with the same expiration date and exercise price as the call would be

Lower dividend-payout policies have a __________ impact on the value of the call and a __________ impact on the value of the put compared to higher dividend-payout policies.

Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to

Portfolio A consists of 400 shares of stock and 400 calls on that stock. Portfolio B consists of 500 shares of stock. The call delta is 0.5. Which portfolio has a higher dollar exposure to a change in stock price?

An American-style call option with six months to maturity has a strike price of $44. The underlying stock now sells for $54. The call premium is $14. What is the time value of the call?

A hedge ratio for a put is always

A $1 decrease in a call option's exercise price would result in a(n) __________ in the call option's value of __________ one dollar.

If the stock price increases, the price of a put option on that stock __________, and that of a call option __________.

The intrinsic value of an at-the-money call option is equal to

Which one of the following variables influences the value of call options?I) Level of interest ratesII) Time to expiration of the optionIII) Dividend yield of underlying stockIV) Stock price volatility

The Investment Environment

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

Efficient Diversification

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral 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

Options Markets: Introduction

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

Lower dividend-payout policies have a impact on the value of the call and a impact on the value of the put compared to higher dividend-payout policies.

A $1 decrease in a call option's exercise price would result in a(n) in the call option's value of one dollar.

If the stock price increases, the price of a put option on that stock , and that of a call option .