Question 1

What are the upper and lower bounds of an American call option? Explain what would happen in each case if the bound was violated.

Accepted Answer

The upper bound on a call is the stock p

Question 2

Which of the following is not true concerning call option writers?

Accepted Answer

A)  Writers promise to deliver shares if exercised by the buyer. 
B)  The writer has the option to sell shares but not an obligation. 
C)  The writer's liability is zero if the option expires out-of-the-money. 
D)  The writer receives a cash payment from the buyer at the time the option is purchased. 
E)  The writer has a loss if the market price rises substantially above the exercise price. 
A)  Writers promise to deliver shares if exercised by the buyer. 
B)  The writer has the option to sell shares but not an obligation. 
C)  The writer's liability is zero if the option expires out-of-the-money. 
D)  The writer receives a cash payment from the buyer at the time the option is purchased. 
E)  The writer has a loss if the market price rises substantially above the exercise price.

Question 3

Jeff opted to exercise his August option on August 10 and received $2,500 in exchange for his shares. Jeff must have owned a (an):

Accepted Answer

A)  warrant. 
B)  American call. 
C)  American put. 
D)  European call. 
A)  warrant. 
B)  American call. 
C)  American put. 
D)  European call.

What are the upper and lower bounds of an American call option? Explain what would happen in each case if the bound was violated.

Which of the following is not true concerning call option writers?

Jeff opted to exercise his August option on August 10 and received $2,500 in exchange for his shares. Jeff must have owned a (an):

Introduction to Corporate Finance

Accounting Statements and Cash Flow

Financial Planning and Growth

Financial Markets and Net Present Value: First Principles of Finance

The Time Value of Money

How to Value Bonds and Stocks

Net Present Value and Other Investment Rules

Net Present Value and Capital Budgeting

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Risk and Return: the Capital Asset Pricing Model

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, Return, and Capital Budgeting

Corporate Financing Decisions and Efficient Capital Markets

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Issuing Equity Securities to the Public

Long-Term Debt

Leasing

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

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Exam 23: Options and Corporate Finance: Basic Concepts

What are the upper and lower bounds of an American call option? Explain what would happen in each case if the bound was violated.

Which of the following is not true concerning call option writers?

Jeff opted to exercise his August option on August 10 and received $2,500 in exchange for his shares. Jeff must have owned a (an):

Introduction to Corporate Finance

Accounting Statements and Cash Flow

Financial Planning and Growth

Financial Markets and Net Present Value: First Principles of Finance

The Time Value of Money

How to Value Bonds and Stocks

Net Present Value and Other Investment Rules

Net Present Value and Capital Budgeting

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Risk and Return: the Capital Asset Pricing Model

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, Return, and Capital Budgeting

Corporate Financing Decisions and Efficient Capital Markets

Long-Term Financing: an Introduction

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Issuing Equity Securities to the Public

Long-Term Debt

Leasing

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit Management

Mergers and Acquisitions

Financial Distress

International Corporate Finance

Filters