Question 1

Explain what a put option is and describe the circumstances under which you would be willing to sell a put.

Accepted Answer

A put option is a financial contract tha

Question 2

An American call option grants the holder the right to:

Accepted Answer

A)  sell the underlying security at the strike price on or before the expiration date. 
B)  sell the underlying asset at the strike price only on the expiration date. 
C)  buy the underlying asset at or below the exercise price on or before the expiration date. 
D)  buy the underlying asset at the exercise price only on the expiration date. 
E)  buy the underlying security at a stated price on or before the expiration date. 
A)  sell the underlying security at the strike price on or before the expiration date. 
B)  sell the underlying asset at the strike price only on the expiration date. 
C)  buy the underlying asset at or below the exercise price on or before the expiration date. 
D)  buy the underlying asset at the exercise price only on the expiration date. 
E)  buy the underlying security at a stated price on or before the expiration date.

Question 3

Which of the following are generally included in a standardized futures contract?
I. delivery date
II. quantity to be delivered
III. specific item to be delivered
IV. delivery location

Accepted Answer

A)  I and II only 
B)  I, II, and III only 
C)  II, III, and IV only 
D)  I, III, and IV only 
E)  I, II, III, and IV 
A)  I and II only 
B)  I, II, and III only 
C)  II, III, and IV only 
D)  I, III, and IV only 
E)  I, II, III, and IV

Question 4

Money market instruments:

Accepted Answer

A)  tend to be illiquid. 
B)  are generally sold in small denominations. 
C)  cannot be resold. 
D)  may be sold on a discount basis. 
E)  are quoted in terms of a spread. 
A)  tend to be illiquid. 
B)  are generally sold in small denominations. 
C)  cannot be resold. 
D)  may be sold on a discount basis. 
E)  are quoted in terms of a spread.

Question 5

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 6

What are the lowest and highest prices per bushel at which the March 08 wheat futures contract sold today?

Accepted Answer

A)  $10.9320; $10.9340 
B)  $10.9325; $10.9350 
C)  $10.6300; $10.9320 
D)  $10.6300; $10.9340 
E)  $10.6300; $10.9350 
A)  $10.9320; $10.9340 
B)  $10.9325; $10.9350 
C)  $10.6300; $10.9320 
D)  $10.6300; $10.9340 
E)  $10.6300; $10.9350

Question 7

Josh owns 200 shares of Chelsea stock. What is the current value of his shares?

Accepted Answer

A)  $6,605 
B)  $8,820 
C)  $9,640 
D)  $9,850 
E)  $10,920 
A)  $6,605 
B)  $8,820 
C)  $9,640 
D)  $9,850 
E)  $10,920

Question 8

A $1,000 face value bond has a 7.85 percent semi-annual coupon and sells for $982.50. What is the current yield?

Accepted Answer

A)  7.75 percent 
B)  7.82 percent 
C)  7.89 percent 
D)  7.99 percent 
E)  7.61 percent 
A)  7.75 percent 
B)  7.82 percent 
C)  7.89 percent 
D)  7.99 percent 
E)  7.61 percent

Question 9

The annual interest payment divided by the current price of a bond is called the:

Accepted Answer

A)  coupon rate. 
B)  current yield. 
C)  yield-to-maturity. 
D)  yield-to-market. 
E)  market yield. 
A)  coupon rate. 
B)  current yield. 
C)  yield-to-maturity. 
D)  yield-to-market. 
E)  market yield.

Question 10

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 11

Baker Company has 136,000 shares of stock outstanding and a PE ratio of 18. What was the net income for the most recent four quarters?

Accepted Answer

A)  $590,089 
B)  $678,003 
C)  $727,972 
D)  $1,306,900 
E)  $1,405,800 
A)  $590,089 
B)  $678,003 
C)  $727,972 
D)  $1,306,900 
E)  $1,405,800

Question 12

You own one futures contract on gold that you purchased at a quoted price of 948.4. The current price quote is 1008.8. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

Accepted Answer

A)  $30.40 
B)  $912.00 
C)  $3,040.00 
D)  $6,040.00 
E)  $9,120.00 
A)  $30.40 
B)  $912.00 
C)  $3,040.00 
D)  $6,040.00 
E)  $9,120.00

Question 13

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $989, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

Accepted Answer

A)  The current coupon rate is greater than 5 percent. 
B)  The bond is a money market instrument. 
C)  The bond will pay less annual interest now than when it was originally issued. 
D)  The current yield exceeds the coupon rate. 
E)  The bond will pay semi-annual payments of $50 each. 
A)  The current coupon rate is greater than 5 percent. 
B)  The bond is a money market instrument. 
C)  The bond will pay less annual interest now than when it was originally issued. 
D)  The current yield exceeds the coupon rate. 
E)  The bond will pay semi-annual payments of $50 each.

Question 14

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 15

You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45. You held the option until the expiration date. On the expiration date, the stock was selling for $21.70 a share. What is the total profit or loss on your option position?

Accepted Answer

A)  -$45 
B)  $0 
C)  -$240 
D)  -$120 
E)  -$135 
A)  -$45 
B)  $0 
C)  -$240 
D)  -$120 
E)  -$135

Question 16

Aldridge, Inc. pays an annual dividend of $1.22. What is the dividend yield on this stock?

Accepted Answer

A)  2.09 percent 
B)  3.54 percent 
C)  4.60 percent 
D)  7.20 percent 
E)  8.04 percent 
A)  2.09 percent 
B)  3.54 percent 
C)  4.60 percent 
D)  7.20 percent 
E)  8.04 percent

Question 17

Futures contracts:

Accepted Answer

A)  require payment in full at the time the contract is written. 
B)  can be resold. 
C)  establish the quantity to be exchanged but not the date of the exchange. 
D)  establish both the quantity to be exchanged and the exchange date but not the price. 
E)  are primary financial assets. 
A)  require payment in full at the time the contract is written. 
B)  can be resold. 
C)  establish the quantity to be exchanged but not the date of the exchange. 
D)  establish both the quantity to be exchanged and the exchange date but not the price. 
E)  are primary financial assets.

Question 18

Money market instruments issued by a corporation:

Accepted Answer

A)  are default-free. 
B)  are less liquid than those issued by the government. 
C)  must be held by the original purchaser until maturity. 
D)  can only be resold to the original issuer. 
E)  are risk-free. 
A)  are default-free. 
B)  are less liquid than those issued by the government. 
C)  must be held by the original purchaser until maturity. 
D)  can only be resold to the original issuer. 
E)  are risk-free.

Question 19

If you purchase five Zeus bonds, the cost will be _____ and the annual interest income will be _____.

Accepted Answer

A)  $5,000.00; $388.75 
B)  $5,000.00; $412.50 
C)  $5,000.00; $460.00 
D)  $5,101.50; $412.50 
E)  $5,101.50; $460.00 
A)  $5,000.00; $388.75 
B)  $5,000.00; $412.50 
C)  $5,000.00; $460.00 
D)  $5,101.50; $412.50 
E)  $5,101.50; $460.00

Question 20

What was the total price fluctuation on one September 08 soybeans contract today?

Accepted Answer

A)  $1,337.50 
B)  $1,340.00 
C)  $1,312.50 
D)  $1,360.00 
E)  $1,362.50 
A)  $1,337.50 
B)  $1,340.00 
C)  $1,312.50 
D)  $1,360.00 
E)  $1,362.50

Explain what a put option is and describe the circumstances under which you would be willing to sell a put.

An American call option grants the holder the right to:

Which of the following are generally included in a standardized futures contract? I. delivery date II. quantity to be delivered III. specific item to be delivered IV. delivery location

Money market instruments:

A call option is an agreement that:

What are the lowest and highest prices per bushel at which the March 08 wheat futures contract sold today?

Josh owns 200 shares of Chelsea stock. What is the current value of his shares?

A $1,000 face value bond has a 7.85 percent semi-annual coupon and sells for $982.50. What is the current yield?

The annual interest payment divided by the current price of a bond is called the:

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?

Baker Company has 136,000 shares of stock outstanding and a PE ratio of 18. What was the net income for the most recent four quarters?

You own one futures contract on gold that you purchased at a quoted price of 948.4. The current price quote is 1008.8. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $989, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

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

You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45. You held the option until the expiration date. On the expiration date, the stock was selling for $21.70 a share. What is the total profit or loss on your option position?

Aldridge, Inc. pays an annual dividend of $1.22. What is the dividend yield on this stock?

Futures contracts:

Money market instruments issued by a corporation:

If you purchase five Zeus bonds, the cost will be _ and the annual interest income will be _.

What was the total price fluctuation on one September 08 soybeans contract today?

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

Explain what a put option is and describe the circumstances under which you would be willing to sell a put.

An American call option grants the holder the right to:

Which of the following are generally included in a standardized futures contract? I. delivery date II. quantity to be delivered III. specific item to be delivered IV. delivery location

Money market instruments:

A call option is an agreement that:

What are the lowest and highest prices per bushel at which the March 08 wheat futures contract sold today?

Josh owns 200 shares of Chelsea stock. What is the current value of his shares?

A $1,000 face value bond has a 7.85 percent semi-annual coupon and sells for $982.50. What is the current yield?

The annual interest payment divided by the current price of a bond is called the:

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?

Baker Company has 136,000 shares of stock outstanding and a PE ratio of 18. What was the net income for the most recent four quarters?

You own one futures contract on gold that you purchased at a quoted price of 948.4. The current price quote is 1008.8. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $989, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

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

You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45. You held the option until the expiration date. On the expiration date, the stock was selling for $21.70 a share. What is the total profit or loss on your option position?

Aldridge, Inc. pays an annual dividend of $1.22. What is the dividend yield on this stock?

Futures contracts:

Money market instruments issued by a corporation:

If you purchase five Zeus bonds, the cost will be _____ and the annual interest income will be _____.

What was the total price fluctuation on one September 08 soybeans contract today?

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

If you purchase five Zeus bonds, the cost will be _ and the annual interest income will be _.