Exhibit 20.6 Use the Information Below for the Following Problem(S) The current stock price of ABC Corporation is $53.50. ABC Corporation has the following put and call option prices that expire 6 months from today. The risk-free rate of return is 5% and the expected return on the market is 11%. \[\begin{array} { c c c } \text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \\ 50 & \$ 1.50 & \$ 5.75 \\ 55 & \$ 3.25 & \ldots \end{array}\] -Refer to Exhibit 20.6.What is the value of a synthetic stock created with put and call options that expire in 6 months with an expiration price of $50?

A) $53.04 B) $53.53 C) $54.54 D) $55.03 E) $56.23 A) $53.04 B) $53.53 C) $54.54 D) $55.03 E) $56.23

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. $\begin{array}{lcccc} &\quad\quad\quad\quad\quad\quad\quad\quad {\text { Calls }} &&\quad\quad\quad\quad\quad\quad\quad\quad {\text { Puts }} \\ \text { Price } & \text { December } & \text { March } & \text { December } & \text { March } \\ \hline 35 & 3\quad3 / 4 & 5 & 1\quad1 / 4 & 2 \\ 40 & 2\quad1 / 2 & 3\quad1 / 2 & 4\quad1 / 2 & 4\quad3 / 4 \end{array}$ -Refer to Exhibit 20.3.If Bruce decides to buy a March call option with an exercise price of 35,what is his dollar gain (loss)if he closes his position when the stock is selling at 43 1/2?

A) $225.00 loss B) $350.00 loss C) $225.00 gain D) $350.00 gain E) $850.00 gain A) $225.00 loss B) $350.00 loss C) $225.00 gain D) $350.00 gain E) $850.00 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. \[\begin{array} { c c c } \text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \\ \$ 45 & \$ 1.50 & \$ 6.75 \\ \$ 50 & \$ 3.75 & \$ 4.25 \end{array}\] -Refer to Exhibit 20.7.The intrinsic value for the put option with a $50 exercise price is

A) $0.00 B) $1.50 C) $2.25 D) $3.75 E) $8.75 A) $0.00 B) $1.50 C) $2.25 D) $3.75 E) $8.75

Exam 20: An Introduction to Derivative Markets and Securities

A stock currently sells for $150 per share.A call option on the stock with an exercise price $155 currently sells for $2.50.The call option is

(Multiple Choice)

4.9/5

(33)

Question 41

Forward and future contracts,as well as options,are types of derivative securities.

(True/False)

4.7/5

(38)

Question 42

Exhibit 20.6 Use the Information Below for the Following Problem(S) The current stock price of ABC Corporation is $53.50. ABC Corporation has the following put and call option prices that expire 6 months from today. The risk-free rate of return is 5% and the expected return on the market is 11%. Exprcisp Price Put Price Call Price 50 \ 1.50 \ 5.75 55 \ 3.25 \ldots -Refer to Exhibit 20.6.What is the value of a synthetic stock created with put and call options that expire in 6 months with an expiration price of $50?

(Multiple Choice)

4.9/5

(41)

Question 43

Which of the following factors is not considered in the valuation of call and put options?

(Multiple Choice)

4.8/5

(36)

Question 44

The payoffs diagrams to both long and short positions in a forward contract are asymmetrical around the contract price.

(True/False)

4.7/5

(40)

Question 45

Futures contracts are slower to absorb new information than forward contracts.

(True/False)

4.9/5

(34)

Question 46

Forward contracts do not require an upfront premium.

(True/False)

4.8/5

(36)

Question 47

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 decides to buy a March call option with an exercise price of 35,what is his dollar gain (loss)if he closes his position when the stock is selling at 43 1/2?

(Multiple Choice)

4.9/5

(35)

Question 48

Exhibit 20.1 Use the Information Below for the Following Problem(S) December futures on the S&P 500 stock index trade at 250 times the index value of 1187.70. Your broker requires an initial margin of 10% percent on futures contracts. The current value of the S&P 500 stock index is 1178. -Refer to Exhibit 20.1.How much must you deposit in a margin account if you wish to purchase one contract?

(Multiple Choice)

4.8/5

(37)

Question 49

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)

4.9/5

(37)

Question 50

A stock currently sells for $75 per share.A call option on the stock with an exercise price $70 currently sells for $5.50.The call option is

(Multiple Choice)

4.9/5

(38)

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. Exprcisp Price Put Price Call Price \ 45 \ 1.50 \ 6.75 \ 50 \ 3.75 \ 4.25 -Refer to Exhibit 20.7.The intrinsic value for the put option with a $50 exercise price is

(Multiple Choice)

4.9/5

(33)

Question 52

Holding a put option and the underlying security at the same time is an example of

(Multiple Choice)

4.9/5

(44)

Question 53

The initial value of a future contract is the price agreed upon in the contract.

(True/False)

4.9/5

(35)

Question 54

Which of the following is not a factor needed to calculate the value of an American call option?

(Multiple Choice)

4.9/5

(40)

Question 55

A stock currently sells for $15 per share.A put option on the stock with an exercise price $20 currently sells for $6.50.The put option is

(Multiple Choice)

4.9/5

(33)

Question 56

A futures contract is an agreement between a trader and the clearinghouse of the exchange for delivery of an asset in the future.

(True/False)

4.8/5

(31)

Question 57

Assume that you purchased shares of a stock at a price of $35 per share.At this time you purchased a put option with a $35 strike price of $3.The stock currently trades at $40.Calculate the dollar return on this option strategy.

(Multiple Choice)

4.9/5

(37)

Question 58

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.If at expiration Peppy is selling for $42.00,what is Sarah's dollar gain or loss?

(Multiple Choice)

4.8/5

(41)

Question 59

A one year call option has a strike price of 50,expires in 6 months,and has a price of $4.74.If the risk free rate is 3%,and the current stock price is $45,what should the corresponding put be worth?

(Multiple Choice)

4.7/5

(29)

Question 60

Showing 41 - 60 of 109

Exam 20: An Introduction to Derivative Markets and Securities

A stock currently sells for $150 per share.A call option on the stock with an exercise price $155 currently sells for $2.50.The call option is

Forward and future contracts,as well as options,are types of derivative securities.

Which of the following factors is not considered in the valuation of call and put options?

The payoffs diagrams to both long and short positions in a forward contract are asymmetrical around the contract price.

Futures contracts are slower to absorb new information than forward contracts.

Forward contracts do not require an upfront premium.

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 stock currently sells for $75 per share.A call option on the stock with an exercise price $70 currently sells for $5.50.The call option is

Holding a put option and the underlying security at the same time is an example of

The initial value of a future contract is the price agreed upon in the contract.

Which of the following is not a factor needed to calculate the value of an American call option?

A stock currently sells for $15 per share.A put option on the stock with an exercise price $20 currently sells for $6.50.The put option is

A futures contract is an agreement between a trader and the clearinghouse of the exchange for delivery of an asset in the future.

Assume that you purchased shares of a stock at a price of $35 per share.At this time you purchased a put option with a $35 strike price of $3.The stock currently trades at $40.Calculate the dollar return on this option strategy.

A one year call option has a strike price of 50,expires in 6 months,and has a price of $4.74.If the risk free rate is 3%,and the current stock price is $45,what should the corresponding put be worth?

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

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

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

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

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

Filters