Question 1

Block Corp 40 call option is selling for $6 and the common stock is selling for $41,the intrinsic value is.

Accepted Answer

A) $6 and the speculative premium is $1 
B) $1 and the speculative premium is $5 
C) $1 and the speculative premium is $7 
D) $5 and the speculative premium is $7 
A) $6 and the speculative premium is $1 
B) $1 and the speculative premium is $5 
C) $1 and the speculative premium is $7 
D) $5 and the speculative premium is $7

Question 2

A naked option write is a conservative strategy.

Accepted Answer

A) True 
 B)False

Question 3

An investor striving for maximum leverage will generally buy options that are:

Accepted Answer

A) In-the-money,or slightly out-of-the-money 
B) Out-of-the-money,or slightly in-the-money 
C) Deep in-the-money 
D) At-the-money 
A) In-the-money,or slightly out-of-the-money 
B) Out-of-the-money,or slightly in-the-money 
C) Deep in-the-money 
D) At-the-money

Question 4

A put writer exposes himself to the risk of declining stock prices.

Accepted Answer

A) True 
 B)False

Question 5

Expiration dates in the option market

Accepted Answer

A) Were expanded by the introduction of LEAPS 
B) Are variable depending on the company 
C) Are limited to a maximum of 9 months 
D) Occur every month on a 12 month calendar basis for each equity option traded 
A) Were expanded by the introduction of LEAPS 
B) Are variable depending on the company 
C) Are limited to a maximum of 9 months 
D) Occur every month on a 12 month calendar basis for each equity option traded

Question 6

The intrinsic value of a put option is equal to the strike price minus the market price of the option.

Accepted Answer

A) True 
 B)False

Question 7

The _______,which functions as the issuer of all options listed on the exchanges,is responsible for the liquidity and ease of operation of the options market.

Accepted Answer

A) Chicago Board Options Exchange 
B) Options Clearing Corporation 
C) New York Stock Exchange 
D) None of the above 
A) Chicago Board Options Exchange 
B) Options Clearing Corporation 
C) New York Stock Exchange 
D) None of the above

Question 8

At the time of expiration,the premium (price)on a call option

Accepted Answer

A) Reflects risk in addition to intrinsic value 
B) Will be equal to the intrinsic value 
C) May be above or below the intrinsic value 
D) None of the above 
A) Reflects risk in addition to intrinsic value 
B) Will be equal to the intrinsic value 
C) May be above or below the intrinsic value 
D) None of the above

Question 9

A stock is selling for $45.75 with a call option available at a $40 strike that has a premium of $7.50.What is the intrinsic value of the call?

Accepted Answer

A) $.75 
B) $1.75 
C) $5.00 
D) $5.75 
E) $7.50 
A) $.75 
B) $1.75 
C) $5.00 
D) $5.75 
E) $7.50

Question 10

Standardized strike prices and expiration dates in the option market

Accepted Answer

A) Allows for more efficient trading strategies 
B) Lowers the time premiums 
C) Allows hedgers,speculators and arbitragers to all operate together 
D) 
A) and 
C)  
A) Allows for more efficient trading strategies 
B) Lowers the time premiums 
C) Allows hedgers,speculators and arbitragers to all operate together 
D) 
A) and 
C)

Question 11

All option contracts are adjusted for stock splits,stock dividends,or other distributions.

Accepted Answer

A) True 
 B)False

Question 12

Assume that a stock is selling for $47 with options available at 20,30,and 40 strike prices.The 40 call option is at 7 1/2.Calculate the following:
(a)The intrinsic value of the $40 call
(b)Is the call in the money?
(c)The speculative premium on the 40 call option
(d)The percent the speculative premium represents of the common stock price.

Accepted Answer

(a)the intrinsic value = $47 -

Question 13

LEAPS have a maximum time to expiration of 5 years.

Accepted Answer

A) True 
 B)False

Question 14

A stock is selling for $35.You buy an April 30 call option for 3.75 and short (write)an April 35 call option for 1.25.You have entered into a vertical spread.If the stock is $43 at expiration,what will your profit or loss be on the spread?

Accepted Answer

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Question 15

A put is purchased for $5 with a $22 strike price.If the stock ends up at $25,the purchaser breaks even.

Accepted Answer

A) True 
 B)False

Question 16

Option writers must own common stock in order to write call options on that particular stock.

Accepted Answer

A) True 
 B)False

Question 17

Generally,the longer the exercise period,the lower the speculative premium.

Accepted Answer

A) True 
 B)False

Question 18

A put or call cannot be purchased for a life of less than the standardized periods of 3,6,or 9 months.

Accepted Answer

A) True 
 B)False

Question 19

The International Securities Market is an ECN (electronic communication network)trading options.

Accepted Answer

A) True 
 B)False

Question 20

_________ is a factor which causes the speculative premium to increase.

Accepted Answer

A) Volatility of the underlying stock as measured by beta 
B) Low dividend yield 
C) A long exercise period 
D) All of the above 
A) Volatility of the underlying stock as measured by beta 
B) Low dividend yield 
C) A long exercise period 
D) All of the above

Exam 15: Put and Call Options

Block Corp 40 call option is selling for $6 and the common stock is selling for $41,the intrinsic value is.

A naked option write is a conservative strategy.

An investor striving for maximum leverage will generally buy options that are:

A put writer exposes himself to the risk of declining stock prices.

Expiration dates in the option market

The intrinsic value of a put option is equal to the strike price minus the market price of the option.

The _______,which functions as the issuer of all options listed on the exchanges,is responsible for the liquidity and ease of operation of the options market.

At the time of expiration,the premium (price)on a call option

A stock is selling for $45.75 with a call option available at a $40 strike that has a premium of $7.50.What is the intrinsic value of the call?

Standardized strike prices and expiration dates in the option market

All option contracts are adjusted for stock splits,stock dividends,or other distributions.

LEAPS have a maximum time to expiration of 5 years.

A stock is selling for $35.You buy an April 30 call option for 3.75 and short (write)an April 35 call option for 1.25.You have entered into a vertical spread.If the stock is $43 at expiration,what will your profit or loss be on the spread?

A put is purchased for $5 with a $22 strike price.If the stock ends up at $25,the purchaser breaks even.

Option writers must own common stock in order to write call options on that particular stock.

Generally,the longer the exercise period,the lower the speculative premium.

A put or call cannot be purchased for a life of less than the standardized periods of 3,6,or 9 months.

The International Securities Market is an ECN (electronic communication network)trading options.

_________ is a factor which causes the speculative premium to increase.

The Investment Setting

Security Markets: Present and Future

Participating in the Market

Sources of Investment Information

Economic and Industry Analysis

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

A Basic View of Technical Analysis and Market Efficiency

Investment in Special Situations and Anomalies

Bond and Fixed Income Fundamentals

Principles of Bond Valuation and Investment

Duration and Reinvestment Concepts

Convertible Securities and Warrants

Commodities and Financial Futures

Stock Index Futures and Options

Mutual Funds

International Securities Markets

Investment in Real Assets

A Basic Look at Portfolio Management and Capital Market Theory

Measuring Risks and Returns of Portfolio Managers

Sustainable Growth Model

a Black Scholes Option Pricing Model

A Comprehensive Analysis for Real Estate Investment Decisions

Unit Investment Trusts Uits

The Makeup of Institutional Investors

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