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 $0.90 and the call option was purchased, what is the dollar gain or loss?

A) $0 B) $3750 gain C) $3660 gain D) $4650 loss E) $2680 loss A) $0 B) $3750 gain C) $3660 gain D) $4650 loss E) $2680 loss

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 85 exercise price, what is your dollar gain or loss if at expiration XYZ is still trading at 101 11/16?

A) $18.75 loss B) $18.75 gain C) $1,668.75 gain D) $1,668.75 loss E) $1,687.50 loss A) $18.75 loss B) $18.75 gain C) $1,668.75 gain D) $1,668.75 loss E) $1,687.50 loss

Exam 13: An Introduction to Derivative Markets and Securities

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 $0.90 and the call option was purchased, what is the dollar gain or loss?

(Multiple Choice)

4.8/5

(41)

Question 101

A calendar spread requires the purchase and sale of two calls or two puts in the same stock

(Multiple Choice)

4.8/5

(34)

Question 102

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 85 exercise price, what is your dollar gain or loss if at expiration XYZ is still trading at 101 11/16?

(Multiple Choice)

4.7/5

(42)

Question 103

A stock currently trades for $63. Call options with a strike price of $62 sell for $4.00 and expire in 6 months. If the risk-free rate is 4%, what should the price of a put option with an exercise price of $62 be worth?

(Multiple Choice)

4.8/5

(46)

Question 104

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 $47.00, what is Sarah's dollar gain or loss?

(Multiple Choice)

4.8/5

(34)

Question 105

Derivative instruments exist because

(Multiple Choice)

4.8/5

(31)

Question 106

The price at which the stock can be acquired or sold is the exercise price.

(True/False)

4.8/5

(32)

Question 107

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)

4.8/5

(32)

Question 108

The price at which a futures contract is set at the end of the day is the

(Multiple Choice)

4.9/5

(46)

Question 109

The initial value of a future contract is the price agreed upon in the contract.

(True/False)

5.0/5

(38)

Question 110

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 short straddle position be if the stock price at expiration is $35?

(Multiple Choice)

4.9/5

(40)

Question 111

Consider a stock that is currently trading at $20. Calculate the intrinsic value for a put option that has an exercise price of $35.

(Multiple Choice)

4.9/5

(41)

Question 112

A stock currently sells for $15 per share. A put option on the stock with an exercise price $20 currently sells for $6.50. The put option is

(Multiple Choice)

4.8/5

(30)

Question 113

Investors buy call options because they expect the price of the underlying stock to increase before the expiration of the option.

(True/False)

4.9/5

(35)

Question 114

Holding a put option and the underlying security at the same time is an example of

(Multiple Choice)

4.8/5

(44)

Question 115

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. Which strategy is most appropriate for an investor who expects stock prices to be volatile, but is inclined to be bullish?

(Multiple Choice)

4.9/5

(33)

Question 116

Which of the following is consistent with put-call-spot parity?

(Multiple Choice)

4.8/5

(37)

Question 117

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 sell a put with a strike price of $80 and a price of $7.25. Calculate the effective price paid to repurchase the stock if the price after 35 days is $70.

(Multiple Choice)

4.8/5

(38)

Question 118

According to put/call parity

(Multiple Choice)

4.8/5

(34)

Question 119

A stock currently trades for $25. January call options with a strike price of $30 sell for $6. The appropriate risk free bond has a price of $30. Calculate the price of the January put option.

(Multiple Choice)

4.8/5

(35)

Question 120

A calendar spread requires the purchase and sale of two calls or two puts in the same stock

A stock currently trades for $63. Call options with a strike price of $62 sell for $4.00 and expire in 6 months. If the risk-free rate is 4%, what should the price of a put option with an exercise price of $62 be worth?

Derivative instruments exist because

The price at which the stock can be acquired or sold is the exercise price.

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 price at which a futures contract is set at the end of the day is the

The initial value of a future contract is the price agreed upon in the contract.

Consider a stock that is currently trading at $20. Calculate the intrinsic value for a put option that has an exercise price of $35.

A stock currently sells for $15 per share. A put option on the stock with an exercise price $20 currently sells for $6.50. The put option is

Investors buy call options because they expect the price of the underlying stock to increase before the expiration of the option.

Holding a put option and the underlying security at the same time is an example of

Which of the following is consistent with put-call-spot parity?

According to put/call parity

A stock currently trades for $25. January call options with a strike price of $30 sell for $6. The appropriate risk free bond has a price of $30. Calculate the price of the January put option.

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

Filters