Exhibit 20.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) On the last day of October, Bruce Springsteen is considering the purchase of 100 shares of Olivia Corporation common stock selling at $37 1/2 per share and also considering an Olivia option. \[\begin{array} { l c c c c } & { \text { Calls } } && { \text { Puts } } \\ \text { Price } & \text { December } & \text { March } & \text { December } & \text { March } \\ \hline 35 & 33 / 4 & 5 & 11 / 4 & 2 \\ 40 & 21 / 2 & 31 / 2 & 41 / 2 & 43 / 4 \end{array}\] -Refer to Exhibit 20.3. If Bruce buys a March put option with an exercise price of 40, what is his dollar gain (loss) if he closes his position when the stock is selling at 43 1/2?

A) $825.00 loss B) $475.00 loss C) $350.00 loss D) $25.00 loss E) He has a gain A) $825.00 loss B) $475.00 loss C) $350.00 loss D) $25.00 loss E) He has a gain

Exhibit 20.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50. \[\begin{array} { c c c } \text { ExercisePrice } & \text { PutPrice } & \text { Call Price } \\ \hline \$ 45 & \$ 1.50 & \$ 6.75 \\ \$ 50 & \$ 3.75 & \$ 4.25 \end{array}\] -Refer to Exhibit 20.7. The time premium for the put option with a $45 exercise price is

A) $0.00 B) $1.50 C) $2.75 D) $5.25 E) $6.50 A) $0.00 B) $1.50 C) $2.75 D) $5.25 E) $6.50

Exhibit 20.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50. \[\begin{array} { c c c } \text { ExercisePrice } & \text { PutPrice } & \text { Call Price } \\ \hline \$ 45 & \$ 1.50 & \$ 6.75 \\ \$ 50 & \$ 3.75 & \$ 4.25 \end{array}\] -Refer to Exhibit 20.7. The time premium for the call option with a $50 exercise price is

A) $0.00 B) $1.50 C) $1.75 D) $4.25 E) $9.25 A) $0.00 B) $1.50 C) $1.75 D) $4.25 E) $9.25

Exhibit 20.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50. \[\begin{array} { c c c } \text { ExercisePrice } & \text { PutPrice } & \text { Call Price } \\ \hline \$ 45 & \$ 1.50 & \$ 6.75 \\ \$ 50 & \$ 3.75 & \$ 4.25 \end{array}\] -Refer to Exhibit 20.7. The intrinsic value for the call option with a $45 exercise price is

A) $0.00 B) $1.50 C) $5.00 D) $5.25 E) $6.75 A) $0.00 B) $1.50 C) $5.00 D) $5.25 E) $6.75

Exam 20: An Introduction to Derivative Markets and Securities

Tom Gettback buys 100 shares of Johnson Walker stock for $87.00 per share and a 3-month Johnson Walker put option with an exercise price of $105.00 for $20.00. What is his dollar gain if at expiration the stock is selling for $80.00 per share?

(Multiple Choice)

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Question 41

In the two state option pricing model, which of the following does not influence the option price?

(Multiple Choice)

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Question 42

Exhibit 20.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) On the last day of October, Bruce Springsteen is considering the purchase of 100 shares of Olivia Corporation common stock selling at $37 1/2 per share and also considering an Olivia option. Calls Puts Price December March December March 35 33/4 5 11/4 2 40 21/2 31/2 41/2 43/4 -Refer to Exhibit 20.3. If Bruce buys a March put option with an exercise price of 40, what is his dollar gain (loss) if he closes his position when the stock is selling at 43 1/2?

(Multiple Choice)

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Question 43

Exhibit 20.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50. ExercisePrice PutPrice Call Price \ 45 \ 1.50 \ 6.75 \ 50 \ 3.75 \ 4.25 -Refer to Exhibit 20.7. The time premium for the put option with a $45 exercise price is

(Multiple Choice)

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Question 44

A call option in which the stock price is higher than the exercise price is said to be

(Multiple Choice)

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Question 45

Futures contracts are similar to forward contracts in that they both

(Multiple Choice)

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Question 46

In the valuation of an option contract, the following statements apply except

(Multiple Choice)

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Question 47

Tom Gettback buys 100 shares of Johnson Walker stock for $87.00 per share and a 3-month Johnson Walker put option with an exercise price of $105.00 for $20.00. What is Tom's dollar gain/loss if at expiration the stock is selling for $105.00 per share?

(Multiple Choice)

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Question 48

A one year call option has a strike price of 50, expires in 6 months, and has a price of $5.04. If the risk free rate is 5%, and the current stock price is $50, what should the corresponding put be worth?

(Multiple Choice)

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Question 49

Investors buy call options because they expect the price of the underlying stock to increase before the expiration of the option.

(True/False)

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Question 50

Which of the following statements is true?

(Multiple Choice)

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Question 51

Exhibit 20.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50. ExercisePrice PutPrice Call Price \ 45 \ 1.50 \ 6.75 \ 50 \ 3.75 \ 4.25 -Refer to Exhibit 20.7. The time premium for the call option with a $50 exercise price is

(Multiple Choice)

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Question 52

The payoffs to both long and short position in the forward contact are symmetric around the contract price.

(True/False)

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Question 53

A futures contract eliminates uncertainty about the future spot price that an individual can expect to pay for an asset at the time of delivery.

(True/False)

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Question 54

A primary function of futures markets is to allow investors to transfer risk.

(True/False)

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Question 55

Exhibit 20.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50. ExercisePrice PutPrice Call Price \ 45 \ 1.50 \ 6.75 \ 50 \ 3.75 \ 4.25 -Refer to Exhibit 20.7. The intrinsic value for the call option with a $45 exercise price is

(Multiple Choice)

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Question 56

An option buyer must exercise the option on or before the expiration date.

(True/False)

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Question 57

Derivative instruments exist because

(Multiple Choice)

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Question 58

The futures market is a dealer market where all the details of the transactions are negotiated.

(True/False)

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Question 59

Exhibit 20.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share. -Refer to Exhibit 20.5. What is Sarah's annualized gain/loss?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 108

Exam 20: An Introduction to Derivative Markets and Securities

Tom Gettback buys 100 shares of Johnson Walker stock for $87.00 per share and a 3-month Johnson Walker put option with an exercise price of $105.00 for $20.00. What is his dollar gain if at expiration the stock is selling for $80.00 per share?

In the two state option pricing model, which of the following does not influence the option price?

A call option in which the stock price is higher than the exercise price is said to be

Futures contracts are similar to forward contracts in that they both

In the valuation of an option contract, the following statements apply except

Tom Gettback buys 100 shares of Johnson Walker stock for $87.00 per share and a 3-month Johnson Walker put option with an exercise price of $105.00 for $20.00. What is Tom's dollar gain/loss if at expiration the stock is selling for $105.00 per share?

A one year call option has a strike price of 50, expires in 6 months, and has a price of $5.04. If the risk free rate is 5%, and the current stock price is $50, what should the corresponding put be worth?

Investors buy call options because they expect the price of the underlying stock to increase before the expiration of the option.

Which of the following statements is true?

The payoffs to both long and short position in the forward contact are symmetric around the contract price.

A futures contract eliminates uncertainty about the future spot price that an individual can expect to pay for an asset at the time of delivery.

A primary function of futures markets is to allow investors to transfer risk.

An option buyer must exercise the option on or before the expiration date.

Derivative instruments exist because

The futures market is a dealer market where all the details of the transactions are negotiated.

Exhibit 20.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share. -Refer to Exhibit 20.5. What is Sarah's annualized gain/loss?

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Organization and Functioning of Securities Markets

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Introduction to Security Valuation

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Equity Portfolio Management Strategies

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

Forward and Futures Contracts

Option Contracts

Swap Contracts, Convertible Securities, and Other Embedded Derivatives

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

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