Question 1

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

Accepted Answer

A)  futures contract. 
B)  call option. 
C)  preset contract. 
D)  put option. 
E)  primary contract. 
A)  futures contract. 
B)  call option. 
C)  preset contract. 
D)  put option. 
E)  primary contract. D

Question 2

What is the current yield on Cloverdale stock?

Accepted Answer

A)  3.35 percent 
B)  3.60 percent 
C)  1.55 percent 
D)  6.25 percent 
E)  7.20 percent 
A)  3.35 percent 
B)  3.60 percent 
C)  1.55 percent 
D)  6.25 percent 
E)  7.20 percent A

Question 3

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. E

Question 4

You bought a put option contract with a strike price of $37.50 and a premium of $1.80. At expiration, the stock was selling for $35 a share. What is the net total amount you received for your shares assuming that you disposed of your shares on the expiration date?

Accepted Answer

A)  $3,680 
B)  $3,930 
C)  $3,570 
D)  $3,330 
E)  $3,320 
A)  $3,680 
B)  $3,930 
C)  $3,570 
D)  $3,330 
E)  $3,320

Question 5

Options expire on the _____ of the expiration month.

Accepted Answer

A)  last trading day 
B)  3rd Friday 
C)  last Friday 
D)  Saturday following the 3rd Friday 
E)  Saturday following the last Friday 
A)  last trading day 
B)  3rd Friday 
C)  last Friday 
D)  Saturday following the 3rd Friday 
E)  Saturday following the last Friday

Question 6

Harvest Fields sold ten September futures contracts on oats. Harvest Fields will:

Accepted Answer

A)  pay for the oats in September. 
B)  take delivery of the oats in September. 
C)  pay for the oats now and take delivery in September. 
D)  receive payment now and deliver in September. 
E)  both receive payment and deliver in September. 
A)  pay for the oats in September. 
B)  take delivery of the oats in September. 
C)  pay for the oats now and take delivery in September. 
D)  receive payment now and deliver in September. 
E)  both receive payment and deliver in September.

Question 7

You own 500 shares of ZZ Industries stock which you purchased for $28.60 a share. You would like to have the right to sell your shares for $30 a share. What will be the cost to obtain this right?

Accepted Answer

A)  $0.40 
B)  $0.90 
C)  $5.00 
D)  $396.00 
E)  $900.00 
A)  $0.40 
B)  $0.90 
C)  $5.00 
D)  $396.00 
E)  $900.00

Question 8

If you are willing to sell a stock and wish to receive the option premium you should:

Accepted Answer

A)  buy a call. 
B)  sell a call. 
C)  buy a put. 
D)  sell a put. 
E)  either sell a call or buy a put. 
A)  buy a call. 
B)  sell a call. 
C)  buy a put. 
D)  sell a put. 
E)  either sell a call or buy a put.

Question 9

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 10

You purchased five call option contracts with a strike price of $40 and an option premium of $1.35. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

Accepted Answer

A)  -$50 
B)  -$10 
C)  $135 
D)  $385 
E)  $575 
A)  -$50 
B)  -$10 
C)  $135 
D)  $385 
E)  $575

Question 11

Which one of the following is a derivative asset?

Accepted Answer

A)  common stock 
B)  option contract 
C)  government bond 
D)  preferred stock 
E)  corporate bond 
A)  common stock 
B)  option contract 
C)  government bond 
D)  preferred stock 
E)  corporate bond

Question 12

Why would you purchase a call option?
 What is your maximum profit or loss on such a position?

Accepted Answer

You would purchase a call option if you

Question 13

Preferred stock is sometimes considered to be a cross between debt and equity. Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

Accepted Answer

Preferred stock is considered to be a cr

Question 14

If you want the right, but not the obligation, to buy a stock at a specified price you should:

Accepted Answer

A)  buy a call. 
B)  sell a call. 
C)  buy a put. 
D)  sell a put. 
E)  either sell a call or buy a put. 
A)  buy a call. 
B)  sell a call. 
C)  buy a put. 
D)  sell a put. 
E)  either sell a call or buy a put.

Question 15

What price will you receive (per underlying share) if you sell the 47.50 call option on JL stock?

Accepted Answer

A)  $4.80 
B)  $5.00 
C)  $5.90 
D)  $6.00 
E)  $6.10 
A)  $4.80 
B)  $5.00 
C)  $5.90 
D)  $6.00 
E)  $6.10

Question 16

What was the previous day's closing price for Baker Co. stock?

Accepted Answer

A)  $74.70 
B)  $75.80 
C)  $76.20 
D)  $78.10 
E)  $80.40 
A)  $74.70 
B)  $75.80 
C)  $76.20 
D)  $78.10 
E)  $80.40

Question 17

You purchased seven put option contracts with a strike price of $25 and a premium of $0.85. At expiration, the stock was selling for $24.80 a share. What is the total net amount you received for your shares, assuming that you disposed of your shares on the expiration date?

Accepted Answer

A)  $17,955 
B)  $16,905 
C)  $17,045 
D)  $17,815 
E)  $17,160 
A)  $17,955 
B)  $16,905 
C)  $17,045 
D)  $17,815 
E)  $17,160

Question 18

A futures contract is an agreement:

Accepted Answer

A)  that obligates a corporation to issue additional securities at a specified date in the future. 
B)  to exchange financial assets on a specified date in the future with the price determined on that date. 
C)  to deliver goods today in exchange for an agreed upon payment to be paid on a specified date in the future. 
D)  to exchange a specified quantity of goods on a specified date in the future at the current market price. 
E)  to exchange goods on a specified date in the future at a price that is agreed upon today. 
A)  that obligates a corporation to issue additional securities at a specified date in the future. 
B)  to exchange financial assets on a specified date in the future with the price determined on that date. 
C)  to deliver goods today in exchange for an agreed upon payment to be paid on a specified date in the future. 
D)  to exchange a specified quantity of goods on a specified date in the future at the current market price. 
E)  to exchange goods on a specified date in the future at a price that is agreed upon today.

Question 19

Which one of the following is the best definition of a money market instrument?

Accepted Answer

A)  corporate debt that matures in 90 days or less 
B)  bank savings account 
C)  investment issued by a financial institution that matures in 30 days or less 
D)  investment issued by a financial institution that matures in one year or less 
E)  debt issued by the government or a corporation that matures in one year or less 
A)  corporate debt that matures in 90 days or less 
B)  bank savings account 
C)  investment issued by a financial institution that matures in 30 days or less 
D)  investment issued by a financial institution that matures in one year or less 
E)  debt issued by the government or a corporation that matures in one year or less

Question 20

A 7.5 percent coupon bond is currently quoted at 89.3 and has a face value of $1,000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds?

Accepted Answer

A)  $56.25 
B)  $75.00 
C)  $100.46 
D)  $112.50 
E)  $200.93 
A)  $56.25 
B)  $75.00 
C)  $100.46 
D)  $112.50 
E)  $200.93

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

What is the current yield on Cloverdale stock?

Investing in a futures contract:

You bought a put option contract with a strike price of $37.50 and a premium of $1.80. At expiration, the stock was selling for $35 a share. What is the net total amount you received for your shares assuming that you disposed of your shares on the expiration date?

Options expire on the _____ of the expiration month.

Harvest Fields sold ten September futures contracts on oats. Harvest Fields will:

You own 500 shares of ZZ Industries stock which you purchased for $28.60 a share. You would like to have the right to sell your shares for $30 a share. What will be the cost to obtain this right?

If you are willing to sell a stock and wish to receive the option premium you should:

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 purchased five call option contracts with a strike price of $40 and an option premium of $1.35. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

Which one of the following is a derivative asset?

Why would you purchase a call option? What is your maximum profit or loss on such a position?

Preferred stock is sometimes considered to be a cross between debt and equity. Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

If you want the right, but not the obligation, to buy a stock at a specified price you should:

What price will you receive (per underlying share) if you sell the 47.50 call option on JL stock?

What was the previous day's closing price for Baker Co. stock?

You purchased seven put option contracts with a strike price of $25 and a premium of $0.85. At expiration, the stock was selling for $24.80 a share. What is the total net amount you received for your shares, assuming that you disposed of your shares on the expiration date?

A futures contract is an agreement:

Which one of the following is the best definition of a money market instrument?

A 7.5 percent coupon bond is currently quoted at 89.3 and has a face value of $1,000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds?

A Brief History of Risk and Return

The Investment Process

Mutual Funds

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 Bonds

Government Bonds

Mortgage-Backed Securities

Filters

Exam 3: Overview of Security Types

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

What is the current yield on Cloverdale stock?

Investing in a futures contract:

You bought a put option contract with a strike price of $37.50 and a premium of $1.80. At expiration, the stock was selling for $35 a share. What is the net total amount you received for your shares assuming that you disposed of your shares on the expiration date?

Options expire on the _____ of the expiration month.

Harvest Fields sold ten September futures contracts on oats. Harvest Fields will:

You own 500 shares of ZZ Industries stock which you purchased for $28.60 a share. You would like to have the right to sell your shares for $30 a share. What will be the cost to obtain this right?

If you are willing to sell a stock and wish to receive the option premium you should:

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 purchased five call option contracts with a strike price of $40 and an option premium of $1.35. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

Which one of the following is a derivative asset?

Why would you purchase a call option? What is your maximum profit or loss on such a position?

Preferred stock is sometimes considered to be a cross between debt and equity. Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

If you want the right, but not the obligation, to buy a stock at a specified price you should:

What price will you receive (per underlying share) if you sell the 47.50 call option on JL stock?

What was the previous day's closing price for Baker Co. stock?

You purchased seven put option contracts with a strike price of $25 and a premium of $0.85. At expiration, the stock was selling for $24.80 a share. What is the total net amount you received for your shares, assuming that you disposed of your shares on the expiration date?

A futures contract is an agreement:

Which one of the following is the best definition of a money market instrument?

A 7.5 percent coupon bond is currently quoted at 89.3 and has a face value of $1,000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds?

A Brief History of Risk and Return

The Investment Process

Mutual Funds

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 Bonds

Government Bonds

Mortgage-Backed Securities

Filters