Exhibit 13-9 USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S) Consider the following information on put and call options for Bank of Montreal $\begin{array}{ccc} \text { Strike Price } & \text { Put Price } & \text { Call Price } \\ \hline \$ 32.50 & \$ 2.85 & \$ 1.65 \end{array}$ -Refer to Exhibit 13-9. A long strap is an appropriate strategy if

A) An investor wishes to generate additional income. B) An investor wished to insure against a decline in share values. C) An investor expected share prices to be volatile. D) An investor expected share prices to remain in a trading range. E) An investor expected share prices to be volatile, but was inclined to be bullish. A) An investor wishes to generate additional income. B) An investor wished to insure against a decline in share values. C) An investor expected share prices to be volatile. D) An investor expected share prices to remain in a trading range. E) An investor expected share prices to be volatile, but was inclined to be bullish.

Exhibit 13-7 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{|l|l|l|c|} \hline \text { Option Type } & & \text { Currency } & {\text { Canadian dollar }} \\ \hline \begin{array}{l} \text { Contract } \\ \text { Size } \end{array} & & 50000 &{\text { Canadian dollars }} \\ \hline \text { Expiry } & & \text { April } & \mid\\ \hline & & &\mid \\ \hline \text { Strike } & \text { Call } & \text { Put } & \mid \\ \hline \$ 0.815 & \$ 0.0118 & &\mid \\ \hline \$ 0.820 & & \$ 0.0068 & \mid\\ \hline \end{array}$ -Refer to Exhibit 13-7. How much must an investor pay for one put option contract?

A) $680 B) $815 C) $340 D) $625 E) $590 A) $680 B) $815 C) $340 D) $625 E) $590

Exam 13: An Introduction to Derivative Markets and Securities

If you were to purchase an October option with an exercise price of 50 for $8 and simultaneously sell an October option with an exercise price of 60 for $2, you would be

(Multiple Choice)

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Question 61

The forward market has low liquidity relative to the futures market.

(True/False)

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Question 62

Exhibit 13-9 USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S) Consider the following information on put and call options for Bank of Montreal Strike Price Put Price Call Price \ 32.50 \ 2.85 \ 1.65 -Refer to Exhibit 13-9. A long strap is an appropriate strategy if

(Multiple Choice)

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Question 63

A price spread (or vertical spread) involves buying and selling an option for the same stock and expiration date but with different exercise prices.

(True/False)

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Question 64

Consider a stock that is currently trading at $45. Calculate the intrinsic value for a call option that has an exercise price of $35.

(Multiple Choice)

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Question 65

An option to sell an asset is referred to as a call, whereas an option to buy an asset is called a put.

(True/False)

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Question 66

Exhibit 13-7 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Option Type Currency Canadian dollar Contract Size 50000 Canadian dollars Expiry April \mid \mid Strike Call Put \mid \ 0.815 \ 0.0118 \mid \ 0.820 \ 0.0068 \mid -Refer to Exhibit 13-7. How much must an investor pay for one put option contract?

(Multiple Choice)

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Question 67

Exhibit 13-10 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00. -Refer to Exhibit 13-10. What would the net value of a long straddle position be if the stock price at expiration is $35?

(Multiple Choice)

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Question 68

The minimum amount that must be maintained in an account is called the maintenance margin.

(True/False)

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Question 69

A stock currently trades at $110. June call options on the stock with a strike price of $120 are priced at $5.75. Calculate the dollar return on one call contract.

(Multiple Choice)

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Question 70

Exhibit 13-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) A futures contract on Treasury bond futures with a December expiration date currently trade at 103:06. The face value of a Treasury bond futures contract is $100,000. Your broker requires an initial margin of 10%. -Refer to Exhibit 13-2. If the futures contract is quoted at 105:08 at expiration, calculate the percentage return.

(Multiple Choice)

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Question 71

Futures contracts are similar to forward contracts in that they both

(Multiple Choice)

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Question 72

A one year call option has a strike price of 50, expires in 6 months, and has a price of $5.04. If the risk free rate is 5%, and the current stock price is $50, what should the corresponding put be worth?

(Multiple Choice)

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Question 73

You own a call option and put option that both have the same exercise price of $50 and their respective prices are $4 and $3. The stock is currently trading at $60. Calculate the dollar return on this strategy.

(Multiple Choice)

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Question 74

A portfolio containing a share of stock and a put option will have the same value as a portfolio containing a call option and the risk-free discount bond.

(True/False)

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Question 75

The value of a call option just prior to expiration is (where V is the underlying asset's market price and X is the option's exercise price)

(Multiple Choice)

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Question 76

The payoffs to both long and short position in the forward contact are symmetric around the contract price.

(True/False)

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Question 77

A primary function of futures markets is to allow investors to transfer risk.

(True/False)

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Question 78

Exhibit 13-4 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Rick Thompson is considering the following alternatives for investing in Davis Industries, which is now selling for $44 per share: 1) Buy 500 shares, and 2) Buy six month call options with an exercise price of 45 for $\$ 3.25$ premium. -Refer to Exhibit 13-4. Assuming no commissions or taxes, what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?

(Multiple Choice)

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Question 79

The option premium is the price the call buyer will pay to the option seller if the option is exercised.

(True/False)

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Question 80

Showing 61 - 80 of 149

If you were to purchase an October option with an exercise price of 50 for $8 and simultaneously sell an October option with an exercise price of 60 for $2, you would be

The forward market has low liquidity relative to the futures market.

Exhibit 13-9 USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S) Consider the following information on put and call options for Bank of Montreal Strike Price Put Price Call Price \ 32.50 \ 2.85 \ 1.65 -Refer to Exhibit 13-9. A long strap is an appropriate strategy if

A price spread (or vertical spread) involves buying and selling an option for the same stock and expiration date but with different exercise prices.

Consider a stock that is currently trading at $45. Calculate the intrinsic value for a call option that has an exercise price of $35.

An option to sell an asset is referred to as a call, whereas an option to buy an asset is called a put.

The minimum amount that must be maintained in an account is called the maintenance margin.

A stock currently trades at $110. June call options on the stock with a strike price of $120 are priced at $5.75. Calculate the dollar return on one call contract.

Futures contracts are similar to forward contracts in that they both

A one year call option has a strike price of 50, expires in 6 months, and has a price of $5.04. If the risk free rate is 5%, and the current stock price is $50, what should the corresponding put be worth?

You own a call option and put option that both have the same exercise price of $50 and their respective prices are $4 and $3. The stock is currently trading at $60. Calculate the dollar return on this strategy.

A portfolio containing a share of stock and a put option will have the same value as a portfolio containing a call option and the risk-free discount bond.

The value of a call option just prior to expiration is (where V is the underlying asset's market price and X is the option's exercise price)

The payoffs to both long and short position in the forward contact are symmetric around the contract price.

A primary function of futures markets is to allow investors to transfer risk.

The option premium is the price the call buyer will pay to the option seller if the option is exercised.

The Investment Setting

The Asset Allocation Decision

Selecting Investments in a Global Market

Securities Markets and the Economy

Efficient Capital Markets

An Introduction to Portfolio Management

Asset Pricing Models: Capm and Apt

Economic and Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Derivatives: Analysis and Valuation

Equity Portfolio Management Strategies

Bond Portfolio Management Strategies

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Analysis of Financial Statements

An Introduction to Security Valuation

Web Appendix: A Review of Statistics and the Security Market Line

Web Appendix: A Review of Statistics and the Security Market Line

Appendix: Objectives and Constraints of Institutional Investors

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