Question 1

The price paid to purchase an option contract is called the:

Accepted Answer

A) strike price. 
B) option premium. 
C) exercise price. 
D) future premium. 
E) current yield. 
A) strike price. 
B) option premium. 
C) exercise price. 
D) future premium. 
E) current yield.

Question 2

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

Accepted Answer

A) $76.00 
B) $228.00 
C) $190.00 
D) $254.00 
E) $304.00 
A) $76.00 
B) $228.00 
C) $190.00 
D) $254.00 
E) $304.00

Question 3

When a put option is exercised,the:

Accepted Answer

A) seller of the option receives the strike price. 
B) seller of the option receives the option premium. 
C) buyer of the option sells the underlying asset and receives the option premium. 
D) buyer of the option pays the option premium and receives the underlying asset. 
E) seller of the option must buy the underlying asset and pay the strike price. 
A) seller of the option receives the strike price. 
B) seller of the option receives the option premium. 
C) buyer of the option sells the underlying asset and receives the option premium. 
D) buyer of the option pays the option premium and receives the underlying asset. 
E) seller of the option must buy the underlying asset and pay the strike price.

Question 4

Bond trades are reported:

Accepted Answer

A) on a weekly basis only. 
B) only when originally sold. 
C) on TRACE. 
D) by the SEC. 
E) only on government issues. 
A) on a weekly basis only. 
B) only when originally sold. 
C) on TRACE. 
D) by the SEC. 
E) only on government issues.

Question 5

You would like to lock in the selling price on 60,000 bushels of wheat,which you plan to harvest and deliver to the market in September.The September futures price quote is currently 902΄6.If you write September futures contracts on your wheat,you will be guaranteed a total price of _____ for your crop.Each contract is quoted in cents and 1/8 ths of a cent per bushel with a contract size of 5,000 bushels.

Accepted Answer

A) $45,637.50 
B) $541,650.00 
C) $11,908.75 
D) $297,700.50 
E) $2,977,000.25 
A) $45,637.50 
B) $541,650.00 
C) $11,908.75 
D) $297,700.50 
E) $2,977,000.25

Question 6

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 1/8 ths 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 7

You own 300 shares of stock which you would like to have the right to sell at $40 a share.The 40 call option is quoted at $0.35 bid,$0.40 ask.The 40 put is quoted at $0.45 bid,$0.50 ask.How much will it cost you to obtain the right to sell all of your shares at $40 a share?

Accepted Answer

A) $135 
B) $50 
C) $150 
D) $105 
E) $75 
A) $135 
B) $50 
C) $150 
D) $105 
E) $75

Question 8

Farmer Mac raises wheat.He expects his yield this summer to be 320,000 bushels but he decides to sell futures contracts on only 230,000 bushels.What is his logic for selling futures and why didn't he sell futures on his entire crop?

Accepted Answer

Farmer Mac's decision to sell futures co

Question 9

You own 700 shares of ZZ Industries stock which you purchased for $36.60 a share.You would like to have the right to sell your shares for $32.50 a share.What will be the cost to obtain this right?

Accepted Answer

A) $0.40 
B) $0.90 
C) $7.00 
D) $396.00 
E) $900.00 
A) $0.40 
B) $0.90 
C) $7.00 
D) $396.00 
E) $900.00

Question 10

You bought eight call option contracts with a strike price of $27.50 and a premium of $0.66.At expiration,the stock was selling for $26.90 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) -$528 
E) -$920 
A) -$9.24 
B) -$10.20 
C) $0 
D) -$528 
E) -$920

Question 11

A call option is an agreement that:

Accepted Answer

A) obligates both the buyer and seller to a future transaction. 
B) grants the seller the right to buy a security at a predetermined price. 
C) gives the buyer the right to purchase an asset at some point in the future. 
D) grants the seller the right, but not the obligation, to sell an asset. 
E) presets a price but not a time period. 
A) obligates both the buyer and seller to a future transaction. 
B) grants the seller the right to buy a security at a predetermined price. 
C) gives the buyer the right to purchase an asset at some point in the future. 
D) grants the seller the right, but not the obligation, to sell an asset. 
E) presets a price but not a time period.

Question 12

The seller of a naked call is betting that the price of the underlying asset will:

Accepted Answer

A) decrease. 
B) increase. 
C) decrease and then increase prior to the expiration date. 
D) will remain constant for a period of time and then increase prior to the expiration date. 
E) have no effect on the value of the call. 
A) decrease. 
B) increase. 
C) decrease and then increase prior to the expiration date. 
D) will remain constant for a period of time and then increase prior to the expiration date. 
E) have no effect on the value of the call.

Question 13

Investing in a futures contract:

Accepted Answer

A) guarantees a sale but not a sale price. 
B) can be profitable for both the buyer and the seller simultaneously. 
C) guarantees the buyer a profit on the contract. 
D) creates a gain for one party without causing a loss for the other party. 
E) can be offset by taking an opposing position. 
A) guarantees a sale but not a sale price. 
B) can be profitable for both the buyer and the seller simultaneously. 
C) guarantees the buyer a profit on the contract. 
D) creates a gain for one party without causing a loss for the other party. 
E) can be offset by taking an opposing position.

Question 14

Which one of the following statements related to common stock is correct?

Accepted Answer

A) Corporations are required to pay annual dividends to its common stockholders. 
B) Corporations have the right to discontinue paying dividends. 
C) Corporations pay dividends at the discretion of the firm's president. 
D) Common stock is a form of corporate debt. 
E) Common stock has a pre-defined liquidation value. 
A) Corporations are required to pay annual dividends to its common stockholders. 
B) Corporations have the right to discontinue paying dividends. 
C) Corporations pay dividends at the discretion of the firm's president. 
D) Common stock is a form of corporate debt. 
E) Common stock has a pre-defined liquidation value.

The price paid to purchase an option contract is called the:

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

When a put option is exercised,the:

Bond trades are reported:

You own 300 shares of stock which you would like to have the right to sell at $40 a share.The 40 call option is quoted at $0.35 bid,$0.40 ask.The 40 put is quoted at $0.45 bid,$0.50 ask.How much will it cost you to obtain the right to sell all of your shares at $40 a share?

Farmer Mac raises wheat.He expects his yield this summer to be 320,000 bushels but he decides to sell futures contracts on only 230,000 bushels.What is his logic for selling futures and why didn't he sell futures on his entire crop?

You own 700 shares of ZZ Industries stock which you purchased for $36.60 a share.You would like to have the right to sell your shares for $32.50 a share.What will be the cost to obtain this right?

You bought eight call option contracts with a strike price of $27.50 and a premium of $0.66.At expiration,the stock was selling for $26.90 a share.What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

A call option is an agreement that:

The seller of a naked call is betting that the price of the underlying asset will:

Investing in a futures contract:

Which one of the following statements related to common stock is correct?

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

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 3: Overview of Security Types

The price paid to purchase an option contract is called the:

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

When a put option is exercised,the:

Bond trades are reported:

You own 300 shares of stock which you would like to have the right to sell at $40 a share.The 40 call option is quoted at $0.35 bid,$0.40 ask.The 40 put is quoted at $0.45 bid,$0.50 ask.How much will it cost you to obtain the right to sell all of your shares at $40 a share?

Farmer Mac raises wheat.He expects his yield this summer to be 320,000 bushels but he decides to sell futures contracts on only 230,000 bushels.What is his logic for selling futures and why didn't he sell futures on his entire crop?

You own 700 shares of ZZ Industries stock which you purchased for $36.60 a share.You would like to have the right to sell your shares for $32.50 a share.What will be the cost to obtain this right?

You bought eight call option contracts with a strike price of $27.50 and a premium of $0.66.At expiration,the stock was selling for $26.90 a share.What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

A call option is an agreement that:

The seller of a naked call is betting that the price of the underlying asset will:

Investing in a futures contract:

Which one of the following statements related to common stock is correct?

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

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters