Exam 13: Risk and the Pricing of Options

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ABX corporation is currently trading for $45 per share.The stock will pay a one-time dividend of $2.25 in exactly 3 months.A one-year European call option on ABX with a strike price of $50 is currently trading for $2.40.If the risk-free interest rate is 9% per year,then the price of a one-year European put option on ABX with a strike price of $50 will be closest to:

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The Black-Scholes formula gives the price of an American call option.

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Which of the following will increase the value of a put option?

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Use the table for the questions below Consider the following information on options from the CBOE for Rackspace. Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to buy 10 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would have to pay for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to buy 10 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would have to pay for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to buy 10 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would have to pay for such a contract is: Use the table for the questions below Consider the following information on options from the CBOE for Rackspace.         -Assume you want to buy 10 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would have to pay for such a contract is: -Assume you want to buy 10 put option contracts with an exercise price closest to being at-the-money and that expires January 2011.The current price that you would have to pay for such a contract is:

(Multiple Choice)
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A put option on a stock has an exercise price of $74.If the stock price at expiration is $79,what is the option payoff for a long put position?

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Rose Industries is currently trading for $47 per share.The stock pays no dividends.A one-year European call option on Luther with a strike price of $45 is currently trading for $7.45.If the risk-free interest rate is 6% per year,then calculate the price of a one-year European put option on Luther with a strike price of $45.

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Consider the following equation: C = P + S - PV(K)- PV(Div) In this equation,what does the term K represent?

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Equity holders have an incentive to ________ the volatility of a firm's assets because they benefit from such an increase at a cost to ________.

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What are American options?

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A call option on a stock has an exercise price of $34.50.If the stock price at expiration is $37.50,what is the option payoff for a short call position?

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Suppose a stock is currently trading for $12,and in one period it will either increase to $15 or decrease to $8.If the one-period risk-free rate is 4%,what is the price of a European put option that expires in one period and has an exercise price of $10?

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A protective put written on a portfolio (rather than a single stock)is known as:

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The payoff to the holder of a put option is given by:

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When you purchase a put option while still holding the underlying stock,it is known as a:

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What is a put option?

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How is equity like a call option on the firm's assets?

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Suppose you purchase a call option for $5 and a strike price of $40.On the expiration day,the price of the stock is $55.What is the return on the call option if you hold your position until maturity?

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The open interest for a January 2011 call option that is closest to being at-the-money is:

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The price at which the holder of an option buys or sells a share of stock when the option is exercised is called the ________ price.

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The value of an otherwise identical American call option is ________ if the exercise date is ________.

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