Exam 17: Options and Corporate Finance

Which of the following statements are correct concerning option values,all else held constant? I.The value of an in-the-money call increases as the price of the underlying stock increases. II.The value of a call decreases as the exercise price increases. III.The value of an in-the-money put increases as the price of the underlying stock increases. IV.The value of a put decreases as the exercise price increases.

Katie D's has total assets valued at $3,160.These assets are expected to be worth either $2,900 or $3,300 by next year.One year from now,the company must repay a $3,100 pure discount bond.The risk-free rate is 4.2 percent.What is the current value of the firm's debt?

In the Black-Scholes option pricing formula,N(d)is the probability that a standardized,normally distributed random variable is:

The lower bound on a call's value is the:

The seller of a call option makes the most profit when the option

The difference between an American call and a European call is that the American call

A stock is selling for $52 a share.The 3-month options have an exercise price of $55.The risk-free rate is 3.2 percent,the standard deviation is 19 percent,and the d₁ value is -0.4587.What is the value of d₂ as it applies to the Black-Scholes option pricing model?

You wrote six put option contracts on Bakers Field stock with an exercise price of $30 and an option price of $2.20.The stock price was $31.20 a share on the option expiration date.Ignoring trading costs and taxes,what is your total net profit or loss on this investment?

The 3-month options on XYZ stock have a strike price of $35 while the stock price is $43.The risk-free rate is 3.15 percent,the standard deviation is 27 percent,N(d₁)is 0.95060 and N(d₂)is 0.93520.What is the call price?

IOU stock is selling for $39.40 a share.The 6-month $40 call costs $1.20.Risk-free assets are currently returning 0.15 percent per month.What is the price of the 6-month $40 put?

The Whistle Stop has a stock price of $17 a share.One-year options have a strike price of $20.The risk-free rate is 2.8 percent,the standard deviation is 29 percent,N(d₁)is 0.37492 and N(d₂)is 0.27131.What is the call price?

The Bakery's assets are currently valued at $2,306.These assets are expected to be worth either $2,100 or $2,600 one year from now.The company has a pure discount bond outstanding with a $2,500 face value and a maturity date of 1 year.The risk-free rate is 2.6 percent.What is the value of the equity in this firm?

Carie opted to exercise her May option on April 3^rd and received $1,750 in exchange for her shares.She must have owned a(n)

The relationship between the prices of the underlying stock,a call option,a put option,and a riskless asset is referred to as the ________ relationship.

Eduardo owns an option that gives him the right to purchase shares of ABC stock at a price of $18 a share.Currently,the stock is selling for $21.60.He would like to profit on this stock but is not permitted to exercise his option for another 2 weeks.Contrary to other investors,he believes the stock price will decline significantly over the next 2 weeks.Given this situation,he should

The 3-month $40 options on Leeway Motors stock are priced at $.22 for the call and $1.54 for the put.The risk-free rate is 0.3 percent per month.What is the per share price of the underlying stock?

You purchased three WXO 15 call option contracts at a quoted price of $.44.What is your net gain or loss on this investment if the price of WXO is $15.70 on the option expiration date?

Bruno's stock is currently selling for $31.74 a share but is expected to increase to either $32 or $37 a share over the next year.The risk-free rate is 3 percent.What is the current value of a 1-year call option with an exercise price of $35?

The intrinsic value of a put is equal to the:

The seller of a put option on 100 shares of stock makes the most profit when the