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. Calculate the payoffs of a short straddle at a stock price at expiration of $20 and a stock price at expiration of $45.

A) $6.35, $18.85 B) $29.65, $42.15 C) $21.65, $34.15 D) $8, $8 E) -$8, -$8 A) $6.35, $18.85 B) $29.65, $42.15 C) $21.65, $34.15 D) $8, $8 E) -$8, -$8

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. If the spot rate at expiration is $0.75 and the put option was purchased, what is the dollar gain or loss?

A) $0 B) $200 loss C) $200 gain D) $3160 gain E) $1187 loss A) $0 B) $200 loss C) $200 gain D) $3160 gain E) $1187 loss

Exhibit 13-6 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) The current stock price of ABC Corporation is $53.50. ABC Corporation has the following put and call option prices that expire 6 months from today. The risk-free rate of return is 5% and the expected return on the market is 11%. $\begin{array}{ccc} \text { Exercise Price } & \text { Put Price } & \text { Call Price } \\ \hline50 & \$ 1.50 & \$ 5.75 \\ 55 & \$ 3.25 & \ldots \end{array}$ -Refer to Exhibit 13-6. What is the value of a synthetic stock created with put and call options that expire in 6 months with an expiration price of $50?

A) $53.04 B) $53.53 C) $54.54 D) $55.03 E) $56.23 A) $53.04 B) $53.53 C) $54.54 D) $55.03 E) $56.23

Exhibit 13-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c} \quad\quad\quad\quad\text { XYZ CORP }\\ \begin{array}{cccc} \hline &{ \quad\quad\quad\text { EXERCISE } } & & { \quad\quad\quad\text { NYSE } } \\ \hline&\text { DATE } & \text { PRICE } & \text { PRICE } & \text { CLOSE } \\ \hline \text {CALLS } & \text { OCT } & 85 & 163 / 4 & 10111 / 16 \\ &\text { OCT } & 90 & 12 & 10111 / 16 \\ &\text { OCT } & 95 & 75 / 8 & 10111 / 16 \\ \text { PUTS } &\text { OCT } & 85 & 1 / 8 & 10111 / 16 \\ &\text { OCT } & 90 & 3 / 8 & 10111 / 16 \\ &\text { OCT } & 95 & 13 / 16 & 10111 / 16 \end{array}\end{array}$ -Refer to Exhibit 13-8. If you establish a long straddle using the options with an 95 exercise price, what is your dollar gain or loss if at expiration XYZ is still trading at 101 11/16?

A) $668.75 gain B) $668.75 loss C) $94.56 gain D) $94.56 loss E) $81.25 loss A) $668.75 gain B) $668.75 loss C) $94.56 gain D) $94.56 loss E) $81.25 loss

Exam 13: An Introduction to Derivative Markets and Securities

A stock currently sells for $150 per share. A call option on the stock with an exercise price $155 currently sells for $2.50. The call option is

(Multiple Choice)

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Question 81

A put option is in the money if the current market price is above the strike price.

(True/False)

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Question 82

Datacorp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate the value of the time premium between the August and October options.

(Multiple Choice)

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Question 83

Which of the following statements is true?

(Multiple Choice)

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Question 84

Consider a stock that is currently trading at $10. Calculate the intrinsic value for a call option that has an exercise price of $15.

(Multiple Choice)

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Question 85

Assume that you have just sold a stock for a loss at a price of $75, for tax purposes. You still wish to maintain exposure to the sold stock. Suppose that you buy a call with a strike price of $70 and a price of $6.75. Calculate the effective price paid to repurchase the stock if the price after 35 days is $80.

(Multiple Choice)

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Question 86

The minimum value of an option is zero.

(True/False)

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Question 87

A buyer of the call option is speculating on the

(Multiple Choice)

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Question 88

The CBOE brought numerous innovations to the option market. Which of the following is not such an innovation?

(Multiple Choice)

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Question 89

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. Calculate the payoffs of a short straddle at a stock price at expiration of $20 and a stock price at expiration of $45.

(Multiple Choice)

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Question 90

An equity portfolio manager can neutralize the risk of falling stock prices by entering into a hedge position where the payoffs are

(Multiple Choice)

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Question 91

Futures differ from forward contracts because

(Multiple Choice)

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Question 92

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. If the spot rate at expiration is $0.75 and the put option was purchased, what is the dollar gain or loss?

(Multiple Choice)

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Question 93

The price paid for the option contract is referred to as the

(Multiple Choice)

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Question 94

Exhibit 13-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share. -Refer to Exhibit 13-5. What is Sarah's annualized gain/loss?

(Multiple Choice)

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Question 95

A futures contract eliminates uncertainty about the future spot price that an individual can expect to pay for an asset at the time of delivery.

(True/False)

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Question 96

Exhibit 13-6 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION(S) The current stock price of ABC Corporation is $53.50. ABC Corporation has the following put and call option prices that expire 6 months from today. The risk-free rate of return is 5% and the expected return on the market is 11%. Exercise Price Put Price Call Price 50 \ 1.50 \ 5.75 55 \ 3.25 \ldots -Refer to Exhibit 13-6. What is the value of a synthetic stock created with put and call options that expire in 6 months with an expiration price of $50?

(Multiple Choice)

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Question 97

A stock currently trades at $110. June put options on the stock with a strike price of $100 are priced at $5.25. Calculate the dollar return on one put contract.

(Multiple Choice)

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Question 98

Exhibit 13-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) XYZ CORP EXERCISE NYSE DATE PRICE PRICE CLOSE CALLS OCT 85 163/4 10111/16 OCT 90 12 10111/16 OCT 95 75/8 10111/16 PUTS OCT 85 1/8 10111/16 OCT 90 3/8 10111/16 OCT 95 13/16 10111/16 -Refer to Exhibit 13-8. If you establish a long straddle using the options with an 95 exercise price, what is your dollar gain or loss if at expiration XYZ is still trading at 101 11/16?

(Multiple Choice)

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Question 99

Exhibit 13-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share. -Refer to Exhibit 13-5. If at expiration Peppy is selling for $42.00, what is Sarah's dollar gain or loss?

(Multiple Choice)

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Question 100

A stock currently sells for $150 per share. A call option on the stock with an exercise price $155 currently sells for $2.50. The call option is

A put option is in the money if the current market price is above the strike price.

Datacorp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate the value of the time premium between the August and October options.

Which of the following statements is true?

Consider a stock that is currently trading at $10. Calculate the intrinsic value for a call option that has an exercise price of $15.

The minimum value of an option is zero.

A buyer of the call option is speculating on the

The CBOE brought numerous innovations to the option market. Which of the following is not such an innovation?

An equity portfolio manager can neutralize the risk of falling stock prices by entering into a hedge position where the payoffs are

Futures differ from forward contracts because

The price paid for the option contract is referred to as the

Exhibit 13-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for a premium of $8.25 when Peppy was selling for $48.00 per share. -Refer to Exhibit 13-5. What is Sarah's annualized gain/loss?

A futures contract eliminates uncertainty about the future spot price that an individual can expect to pay for an asset at the time of delivery.

A stock currently trades at $110. June put options on the stock with a strike price of $100 are priced at $5.25. Calculate the dollar return on one put contract.

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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