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 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 20.6 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%. \[\begin{array} { c c c } \text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \\ 50 & \$ 1.50 & \$ 5.75 \\ 55 & \$ 3.25 & \ldots \end{array}\] -You own a call option and put option that both have the same exercise price of $50 and their respective prices are $4 and $3.The stock is currently trading at $60.Calculate the dollar return on this strategy.

A) $1.00 B) $2.00 C) $3.00 D) $4.00 E) $5.00 A) $1.00 B) $2.00 C) $3.00 D) $4.00 E) $5.00

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 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

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 81

An expiration date payoff and profit diagram for forward positions illustrates

(Multiple Choice)

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Question 82

A hedge strategy known as a collar agreement involves the simultaneous

(Multiple Choice)

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Question 83

The price at which a futures contract is set at the end of the day is the

(Multiple Choice)

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Question 84

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

(True/False)

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Question 85

The forward market has low liquidity relative to the futures market.

(True/False)

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Question 86

The price at which the stock can be acquired or sold is the exercise price.

(True/False)

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Question 87

A one year call option has a strike price of 70,expires in 3 months,and has a price of $7.34.If the risk free rate is 6%,and the current stock price is $62,what should the corresponding put be worth?

(Multiple Choice)

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Question 88

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.Calculate the return on a cash investment in the S&P 500 stock index if the ending index value is 1170 over the same time period.

(Multiple Choice)

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Question 89

The minimum amount that must be maintained in an account is called the maintenance margin.

(True/False)

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Question 90

Exhibit 20.4 Use the Information Below for the Following Problem(S) Rick Thompson is considering the following alternatives for investing in Davis Industries which is now selling for $44 per share: (1) Buy 500 shares, and (2) Buy six month call options with mexercise price of 45 for $\$ 3.25$ premium -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 91

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 92

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 -You own a call option and put option that both have the same exercise price of $50 and their respective prices are $4 and $3.The stock is currently trading at $60.Calculate the dollar return on this strategy.

(Multiple Choice)

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Question 93

A stock currently trades at $110.June put options on the stock with a strike price of $100 are priced at $5.25.Calculate the dollar return on one put contract.

(Multiple Choice)

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Question 94

Consider a stock that is currently trading at $10.Calculate the intrinsic value for a call option that has an exercise price of $15.

(Multiple Choice)

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Question 95

A vertical spread involves buying and selling call options in the same stock with

(Multiple Choice)

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Question 96

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 call option with a $45 exercise price is

(Multiple Choice)

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Question 97

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.Suppose at expiration the futures contract price is 250 times the index value of 1170.Disregarding transaction costs,what is your percentage return?

(Multiple Choice)

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Question 98

Exhibit 20.4 Use the Information Below for the Following Problem(S) Rick Thompson is considering the following alternatives for investing in Davis Industries which is now selling for $44 per share: (1) Buy 500 shares, and (2) Buy six month call options with mexercise price of 45 for $\$ 3.25$ premium -Refer to Exhibit 20.4.Assuming no commissions or taxes,what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?

(Multiple Choice)

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Question 99

The price paid for the option contract is referred to as the

(Multiple Choice)

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Question 100

Showing 81 - 100 of 109

Exam 20: An Introduction to Derivative Markets and Securities

An expiration date payoff and profit diagram for forward positions illustrates

A hedge strategy known as a collar agreement involves the simultaneous

The price at which a futures contract is set at the end of the day is the

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

The forward market has low liquidity relative to the futures market.

The price at which the stock can be acquired or sold is the exercise price.

A one year call option has a strike price of 70,expires in 3 months,and has a price of $7.34.If the risk free rate is 6%,and the current stock price is $62,what should the corresponding put be worth?

The minimum amount that must be maintained in an account is called the maintenance margin.

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?

A stock currently trades at $110.June put options on the stock with a strike price of $100 are priced at $5.25.Calculate the dollar return on one put contract.

Consider a stock that is currently trading at $10.Calculate the intrinsic value for a call option that has an exercise price of $15.

A vertical spread involves buying and selling call options in the same stock with

The price paid for the option contract is referred to as the

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

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