Question 1

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

Accepted Answer

A) futures contract. 
B) call option. 
C) preset contract. 
D) put option. 
E) primary contract. 
A) futures contract. 
B) call option. 
C) preset contract. 
D) put option. 
E) primary contract.

Question 2

Use the following soybean futures quotes to answer this question.
Soybeans: 5,000 bushels, cents and 1/8ths of a cent per bushel
$\begin{array}{ccccc}
 \operatorname{Exp} & \text { Last } & \text { Net Chg } & \text { Open } & \text { High } & \text { Low }& \text { Settle} \
 \text { 08 Sep } & 1314^{\prime} 0& -3^{\prime} 4 & 1340^{\prime} 2 & 1340^{\prime} 6 & 1313^{\prime} 4 &1314^{\prime}0\
\text { 08 Nov }  & 1285^{\prime }2 & +4{ }^{\prime}2 & 1306^{\prime}0 & 1312 ^{\prime}2&1280 ^{\prime}0&1285^{\prime}2 \
\end{array}$

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Julie was lucky enough to purchase three September 08 futures contracts on soybeans when the contracts were at the lowest price of the day. What is Julie's total profit or loss as of the end of the day?

Accepted Answer

A) $25.00 
B) $50.00 
C) $75.00 
D) $250.00 
E) $260.00 
A) $25.00 
B) $50.00 
C) $75.00 
D) $250.00 
E) $260.00

Question 3

Options expire on the ________ of the expiration month.

Accepted Answer

A) last trading day 
B) 3rd Friday 
C) last Friday 
D) Saturday following the 3rd Friday 
E) Saturday following the last Friday 
A) last trading day 
B) 3rd Friday 
C) last Friday 
D) Saturday following the 3rd Friday 
E) Saturday following the last Friday

Question 4

A European put option grants the holder the right to:

Accepted Answer

A) buy the underlying security at a stated price at any time up to and including the expiration date. 
B) sell the underlying security at the strike price on or before the expiration date. 
C) sell the underlying asset at the strike price only on the expiration date. 
D) buy the underlying asset at or below the exercise price on or before the expiration date. 
E) buy the underlying asset at the exercise price on the expiration date. 
A) buy the underlying security at a stated price at any time up to and including the expiration date. 
B) sell the underlying security at the strike price on or before the expiration date. 
C) sell the underlying asset at the strike price only on the expiration date. 
D) buy the underlying asset at or below the exercise price on or before the expiration date. 
E) buy the underlying asset at the exercise price on the expiration date.

Question 5

Alicia owns 500 shares of Danube stock. She thinks the market price will continue to rise but would like to ensure that she can get at least $47.50 a share should she decide to sell her shares. The 47.50 call option is quoted at $1.05 bid, $1.15 ask. The 47.50 put is quoted at $.80 bid, $.85 ask. How much will it cost her to ensure that she can sell all her shares for at least $47.50 each?

Accepted Answer

A) $805 
B) $740 
C) $670 
D) $530 
E) $425 
A) $805 
B) $740 
C) $670 
D) $530 
E) $425

Question 6

Which of the following are generally included in a standardized futures contract?
I. delivery date
II. quantity to be delivered
III. specific item to be delivered
IV. delivery location

Accepted Answer

A) I and II only 
B) I, II, and III only 
C) II, III, and IV only 
D) I, III, and IV only 
E) I, II, III, and IV 
A) I and II only 
B) I, II, and III only 
C) II, III, and IV only 
D) I, III, and IV only 
E) I, II, III, and IV

Question 7

Use the following stock quotes to answer this question:
$\text { 52-WEEK }$
$\begin{array}{ccrrrr}
\text { Company } & \text { Volume } & \text { Close } & \text { Chg } & \text { High } & \text { Low } \
\text { Buy Rite } & 5,078,420 & 101.13 & -.05 & 104.90 & 82.13 \
\text { Cloverdale } & 47,126,338 & 21.48 & +.01 & 30.15 & 16.80 \
\text { Ditch Digcer } & 11,298,006 & 48.19 & -.13 & 55.62 & 48.19
\end{array}$
What is today's closing price per share of Buy Rite stock?

Accepted Answer

A) $82.13 
B) $101.13 
C) $821.30 
D) $1,011.30 
E) $1,049.00 
A) $82.13 
B) $101.13 
C) $821.30 
D) $1,011.30 
E) $1,049.00

Question 8

A futures contract is an agreement:

Accepted Answer

A) that obligates a corporation to issue additional securities on a specified date in the future. 
B) to exchange financial assets on a specified date in the future with the price determined on that date. 
C) to deliver goods today in exchange for an agreed upon payment to be paid on a specified date in the future. 
D) to exchange a specified quantity of goods on a specified date in the future at the current market price. 
E) to exchange goods on a specified date in the future at a price that is agreed upon today. 
A) that obligates a corporation to issue additional securities on a specified date in the future. 
B) to exchange financial assets on a specified date in the future with the price determined on that date. 
C) to deliver goods today in exchange for an agreed upon payment to be paid on a specified date in the future. 
D) to exchange a specified quantity of goods on a specified date in the future at the current market price. 
E) to exchange goods on a specified date in the future at a price that is agreed upon today.

Question 9

Use the following wheat futures quotes to answer this question.
Price $ = $ cents and $ 1 / 8 $ ths per bushel $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Prev
 $\begin{array}{lccccccc}
\text { Exp } & \text { Last } & \text { Open } & \text { High } & \text { Low } & \text { Close } & \text { Settle } & \text { Settle } \
\text { 08 Mar } & 1093^{\prime} 2 & 1093^{\prime} 2 & 1093^{\prime} 4 & 1093^{\prime} 2 & 1093^{\prime} 2 & 1093^{\prime}2 & 1063^{\prime} 0\
\text { 08 May } & 1109^{\prime} 4 & 1109^{\prime} 6 & 1109^{\prime} 6 & 1109^{\prime} 2 & 1109^{\prime} 4 & 1109^{\prime} 4 & 1080^{\prime}2
\end{array}$

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What are the lowest and highest prices per bushel at which the March 08 wheat futures contract sold today?

Accepted Answer

A) $10.9320; $10.9340 
B) $10.9325; $10.9350 
C) $10.6300; $10.9320 
D) $10.6300; $10.9340 
E) $10.6300; $10.9350 
A) $10.9320; $10.9340 
B) $10.9325; $10.9350 
C) $10.6300; $10.9320 
D) $10.6300; $10.9340 
E) $10.6300; $10.9350

Question 10

You purchased five August 13 futures contracts on soybeans at a price quote of 1056′6. Each contract is for 5,000 bushels with the price quoted in cents and 1/8ths of a cent per bushel. Assume the contract price is 1061′4 when you close out your contract six weeks from now. What will be your total profit or loss on this investment?

Accepted Answer

A) $950.25 
B) $1,187.50 
C) $6,480.75 
D) $16,200.50 
E) $24,000.00 
A) $950.25 
B) $1,187.50 
C) $6,480.75 
D) $16,200.50 
E) $24,000.00

Question 11

Use the following wheat futures quotes to answer this question.
Price $ = $ cents and $ 1 / 8 $ ths per bushel $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Prev
 $\begin{array}{lccccccc}
\text { Exp } & \text { Last } & \text { Open } & \text { High } & \text { Low } & \text { Close } & \text { Settle } & \text { Settle } \
\text { 08 Mar } & 1093^{\prime} 2 & 1093^{\prime} 2 & 1093^{\prime} 4 & 1093^{\prime} 2 & 1093^{\prime} 2 & 1093^{\prime}2 & 1063^{\prime} 0\
\text { 08 May } & 1109^{\prime} 4 & 1109^{\prime} 6 & 1109^{\prime} 6 & 1109^{\prime} 2 & 1109^{\prime} 4 & 1109^{\prime} 4 & 1080^{\prime}2
\end{array}$

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By how much did today's settlement price per bushel for the Mar 08 wheat futures contract increase over the prior day's settlement price?

Accepted Answer

A) $.3020 
B) $.3025 
C) $30.20 
D) $30.25 
E) $30.50 
A) $.3020 
B) $.3025 
C) $30.20 
D) $30.25 
E) $30.50

Question 12

You own 200 shares of stock which you would like to have the right to sell at $40 a share. The 40 call option is quoted at $.35 bid, $.40 ask. The 40 put is quoted at $.50 bid, $.55 ask. How much will it cost you to obtain the right to sell all your shares at $40 a share?

Accepted Answer

A) $70 
B) $80 
C) $100 
D) $110 
E) $130 
A) $70 
B) $80 
C) $100 
D) $110 
E) $130

Question 13

If you want the right, but not the obligation, to sell a stock at a specified price you should:

Accepted Answer

A) buy a call. 
B) sell a call. 
C) buy a put. 
D) sell a put. 
E) either sell a call or buy a put. 
A) buy a call. 
B) sell a call. 
C) buy a put. 
D) sell a put. 
E) either sell a call or buy a put.

Question 14

Use the following stock quotes to answer this question:
$\text { 52-WEEK }$
$\begin{array}{lccccc} 
 \text{ Company} & \text{  Volume} &  \text{ Close} &  \text{ Chg }&  \text{ High }& \text{ Low } \
 \text{ Aldridge, Inc.} &  32,653,080 & 34.50 & -.20 & 41.60 & 33.90 \
 \text{ Baker Co.} & 11,508,900 & 78.10 & -2.30 & 82.30 & 74.60 \
 \text{ Chelsea, Inc. }& 51.873,450 & 48.20 & 4.10 & 48.60 & 29.40
\end{array}$

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Vivian purchased 700 shares of Aldridge, Inc., stock at what turns out to be the lowest price during the past year. How much has the value of her shares changed since she made this investment?

Accepted Answer

A) -$4,970 
B) $60 
C) $1,950 
D) $420 
E) $5,390 
A) -$4,970 
B) $60 
C) $1,950 
D) $420 
E) $5,390

Question 15

Which one of the following is a derivative asset?

Accepted Answer

A) common stock 
B) option contract 
C) government bond 
D) preferred stock 
E) corporate bond 
A) common stock 
B) option contract 
C) government bond 
D) preferred stock 
E) corporate bond

Question 16

You bought nine call option contracts with a strike price of $25.00 and a premium of $.50. At expiration, the stock was selling for $23.75 a share. What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

Accepted Answer

A) −$9.24 
B) −$10.20 
C) $0 
D) −$270 
E) −$450 
A) −$9.24 
B) −$10.20 
C) $0 
D) −$270 
E) −$450

Question 17

Jay owns 500 shares of Baker stock. The current bid price is $78.05 per share and the current ask price is $78.10 per share. What is the current value of his shares?

Accepted Answer

A) $26,605 
B) $28,820 
C) $39,025 
D) $39,050 
E) $40,350 
A) $26,605 
B) $28,820 
C) $39,025 
D) $39,050 
E) $40,350

Question 18

Use the following bond quotes to answer this question:
$\begin{array}{cccccccc}
\text { Company}&\text { Coupon}&\text { Maturity }&\text {High}&\text { Low }&\text {Last }&\text {Change}&\text { Yield }\
\text {Falliru } & 7.60 & \text { Nov } 2012 & 100.05 & 99.68 & 99.89 & .02 & ? \
\text { Co. } & & & & & & & \
\text { Zeus } & 8.25 & \text { Apr } 2016 & 102.41 & 101.87 & 102.03 & -.10 & ?
\end{array}$

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The Zeus Company bond pays interest semi-annually. You own five of these bonds. What is the amount you will receive as your next interest payment?

Accepted Answer

A) $76.00 
B) $206.25 
C) $190.00 
D) $247.50 
E) $304.00 
A) $76.00 
B) $206.25 
C) $190.00 
D) $247.50 
E) $304.00

Question 19

The current yield of a bond is defined as the:

Accepted Answer

A) annual interest payment divided by the current price. 
B) coupon rate. 
C) present value divided by the face value. 
D) current price divided by the annual interest payment of a bond. 
E) yield-to-market divided by the current price. 
A) annual interest payment divided by the current price. 
B) coupon rate. 
C) present value divided by the face value. 
D) current price divided by the annual interest payment of a bond. 
E) yield-to-market divided by the current price.

Question 20

Preferred stock:

Accepted Answer

A) is a type of corporate debt. 
B) is treated like debt for tax purposes. 
C) is listed in the liabilities section of a balance sheet. 
D) has a stated dividend but no stated liquidation value. 
E) is treated like equity for both tax and accounting purposes. 
A) is a type of corporate debt. 
B) is treated like debt for tax purposes. 
C) is listed in the liabilities section of a balance sheet. 
D) has a stated dividend but no stated liquidation value. 
E) is treated like equity for both tax and accounting purposes.

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

Options expire on the ________ of the expiration month.

A European put option grants the holder the right to:

Which of the following are generally included in a standardized futures contract? I. delivery date II. quantity to be delivered III. specific item to be delivered IV. delivery location

A futures contract is an agreement:

You own 200 shares of stock which you would like to have the right to sell at $40 a share. The 40 call option is quoted at $.35 bid, $.40 ask. The 40 put is quoted at $.50 bid, $.55 ask. How much will it cost you to obtain the right to sell all your shares at $40 a share?

If you want the right, but not the obligation, to sell a stock at a specified price you should:

Which one of the following is a derivative asset?

You bought nine call option contracts with a strike price of $25.00 and a premium of $.50. At expiration, the stock was selling for $23.75 a share. What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

Jay owns 500 shares of Baker stock. The current bid price is $78.05 per share and the current ask price is $78.10 per share. What is the current value of his shares?

The current yield of a bond is defined as the:

Preferred stock:

A Brief History of Risk and Return

The Investment Process

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

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 3: Overview of Security Tips

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

Options expire on the ________ of the expiration month.

A European put option grants the holder the right to:

Which of the following are generally included in a standardized futures contract? I. delivery date II. quantity to be delivered III. specific item to be delivered IV. delivery location

A futures contract is an agreement:

You own 200 shares of stock which you would like to have the right to sell at $40 a share. The 40 call option is quoted at $.35 bid, $.40 ask. The 40 put is quoted at $.50 bid, $.55 ask. How much will it cost you to obtain the right to sell all your shares at $40 a share?

If you want the right, but not the obligation, to sell a stock at a specified price you should:

Which one of the following is a derivative asset?

You bought nine call option contracts with a strike price of $25.00 and a premium of $.50. At expiration, the stock was selling for $23.75 a share. What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

Jay owns 500 shares of Baker stock. The current bid price is $78.05 per share and the current ask price is $78.10 per share. What is the current value of his shares?

The current yield of a bond is defined as the:

Preferred stock:

A Brief History of Risk and Return

The Investment Process

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

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters