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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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:
(Multiple Choice)
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The Black-Scholes formula gives the price of an American call option.
(True/False)
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Which of the following will increase the value of a put option?
(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 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?
(Multiple Choice)
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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.
(Essay)
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Consider the following equation: C = P + S - PV(K)- PV(Div)
In this equation,what does the term K represent?
(Multiple Choice)
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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 ________.
(Multiple Choice)
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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?
(Multiple Choice)
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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?
(Multiple Choice)
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A protective put written on a portfolio (rather than a single stock)is known as:
(Multiple Choice)
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When you purchase a put option while still holding the underlying stock,it is known as a:
(Multiple Choice)
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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?
(Multiple Choice)
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The open interest for a January 2011 call option that is closest to being at-the-money is:
(Multiple Choice)
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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.
(Multiple Choice)
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The value of an otherwise identical American call option is ________ if the exercise date is ________.
(Multiple Choice)
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