Exam 13: Risk and the Pricing of Options
Exam 1: Corporate Finance and the Financial Manager93 Questions
Exam 2: Introduction to Financial Statement Analysis122 Questions
Exam 3: The Valuation Principle: the Foundation of Financial Decision Making120 Questions
Exam 4: The Time Value of Money101 Questions
Exam 5: Interest Rates118 Questions
Exam 6: Bonds122 Questions
Exam 7: Valuing Stocks122 Questions
Exam 8: Investment Decision Rules136 Questions
Exam 9: Fundamentals of Capital Budgeting108 Questions
Exam 10: Risk and Return in Capital Markets101 Questions
Exam 11: Systematic Risk and the Equity Risk Premium102 Questions
Exam 12: Determining the Cost of Capital107 Questions
Exam 13: Risk and the Pricing of Options112 Questions
Exam 14: Raising Equity Capital106 Questions
Exam 15: Debt Financing112 Questions
Exam 16: Capital Structure114 Questions
Exam 17: Payout Policy101 Questions
Exam 18: Financial Modelling and Pro Forma Analysis124 Questions
Exam 19: Working Capital Management122 Questions
Exam 20: Short-Term Financial Planning105 Questions
Exam 21: Risk Management111 Questions
Exam 22: International Corporate Finance113 Questions
Exam 23: Leasing88 Questions
Exam 24: Mergers and Acquisitions80 Questions
Exam 25: Corporate Governance53 Questions
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When the exercise price of a call option is higher than the current price of the stock,the option is said to be:
(Multiple Choice)
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ABX corporation stock is currently trading for $37.60.A one-year European call option on ABX is currently trading for $7.23,and a one-year European put option on ABX with the same strike price is currently trading for $0.76.If the stock pays no dividends,and the risk-free rate is 3% per year,what is the strike price of the options?
(Multiple Choice)
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The Black-Scholes formula is notable because it does NOT require us to know:
(Multiple Choice)
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Standard stock options are traded and bought and sold through dealers only and cannot be bought via an exchange.
(True/False)
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You have shorted a call option on WSJ stock with a strike price of $50.The option will expire in exactly six months.If the stock is trading at $60 in three months,what will you owe for each share in the contract?
(Multiple Choice)
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You have shorted a call option on WSJ stock with a strike price of $50.The option will expire in exactly six months.If the stock is trading at $45 in three months,what will you owe for each share in the contract?
(Multiple Choice)
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Use the table for the questions below
Consider the following information on options from the CBOE for Rackspace.
-Assume you want to sell 20 call option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is:




(Multiple Choice)
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An investor purchases a call option and its underlying stock on the same day.If the stock appreciates by 25%,the call option will appreciate by:
(Multiple Choice)
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Use the table for the questions below
Consider the following information on options from the CBOE for Rackspace.
-Assume you want to sell 20 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would receive for such a contract is:




(Multiple Choice)
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________ is the relationship between the value of a stock,a bond,and call and put options on the same stock with the same exercise price.
(Multiple Choice)
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The price of a European call option on Lululemon stock with an exercise price of $34.50 and one year to expiry is trading at $2.52.The current price of the stock is $34,and the risk-free rate is 4%.With no arbitrage,what must be the price of a European put on Lululemon with an exercise price of $34.50?
(Multiple Choice)
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The ________ side of an options contract has the option to exercise,while the ________ side has an obligation to fulfill the contract.
(Multiple Choice)
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Suppose a stock is currently trading for $35,and in one period it will either increase to $38 or decrease to $33.If the one-period risk-free rate is 6%,what is the price of a European put option that expires in one period and has an exercise price of $36?
(Multiple Choice)
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A put option on a stock has an exercise price of $31.If the stock price at expiration is $33.40,what is the option payoff for a short put position?
(Multiple Choice)
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You pay $3.25 for a call option on Luther Industries that expires in three months with a strike price of $40.00.Three months later,at expiration,Luther Industries is trading at $41.00 per share.Your profit per share on this transaction is closest to:
(Multiple Choice)
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Debt holders can be thought as owning the firm but having ________ a call option on the assets of the firm with a strike price equal to ________.
(Multiple Choice)
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A call option on a stock has an exercise price of $22.25.If the stock price at expiration is $25,what is the option payoff for a long call position?
(Multiple Choice)
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A(n)________ in the volatility of assets of the firm benefits ________ at a cost to debt holders.
(Multiple Choice)
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