Question 1

A pension fund purchased 25 round lots of Baker Company stock at the closing price of the day yesterday. What was the cost of that purchase?

Accepted Answer

A)  $7,810 
B)  $8,040 
C)  $201,000 
D)  $241,200 
E)  $256,800

Question 2

What price would you have paid today per bushel for the May 08 wheat futures contract if you bought the contract at the final price of the day?

Accepted Answer

A)  $10.8020 
B)  $10.8025 
C)  $11.0940 
D)  $11.0950 
E)  $11.0960

Question 3

Vivian purchased 700 shares of Aldridge, Inc. stock at what turns out to be the lowest price during the past year. How much has the value of her shares changed since she made this investment?

Accepted Answer

A)  -$4,970 
B)  $60 
C)  $1,950 
D)  $420 
E)  $5,390

Question 4

A European put option grants the holder the right to:

Accepted Answer

A)  buy the underlying security at a stated price at any time up to and including the expiration date. 
B)  sell the underlying security at the strike price on or before the expiration date. 
C)  sell the underlying asset at the strike price only on the expiration date. 
D)  buy the underlying asset at or below the exercise price on or before the expiration date. 
E)  buy the underlying asset at the exercise price on the expiration date.

Question 5

How many whole shares of Ditch Digger stock traded today?

Accepted Answer

A)  11,298 
B)  112,980 
C)  11,298,006 
D)  112,980,060 
E)  1,129,800,600

Question 6

What was yesterday's closing price on the Alpha Industrial bond?

Accepted Answer

A)  $993.86 
B)  $993.94 
C)  $994.02 
D)  $994.10 
E)  $998.31

Question 7

By how much did today's settlement price per bushel for the May 08 wheat futures contract increase over the prior day's settlement price?

Accepted Answer

A)  $0.2920 
B)  $0.2925 
C)  $29.20 
D)  $29.25 
E)  $29.50

Question 8

Uptown Jewelers purchased a futures contract on 200 ounces of gold to be exchanged 3-months from now. As the contract holder, Uptown Jewelers:

Accepted Answer

A)  has the right, but not the obligation, to purchase 200 ounces of gold 3 months from now. 
B)  has the obligation to purchase 200 ounces of gold at the market price three months from now. 
C)  has an obligation to buy 200 ounces of gold but only if the price of gold increases within the next 3 months. 
D)  is expecting the price of gold to decrease and thus is locking in a selling price. 
E)  will profit if the price of gold is higher three months from now.

Question 9

An agreement that grants the owner the right, but not the obligation, to buy or sell a specific asset at a specified price during a specified time period is called a(n) _____ contract.

Accepted Answer

A)  futures 
B)  obligatory 
C)  quoted 
D)  fixed 
E)  option

Question 10

You purchased six put option contracts with a strike price of $45 and a premium of $1.10. What is the total net amount you will receive for your shares if you exercise this contract when the underlying stock is selling for $42.90 a share?

Accepted Answer

A)  $23,660 
B)  $24,700 
C)  $25,740 
D)  $26,340 
E)  $26,400

Question 11

When a put option is exercised, the:

Accepted Answer

A)  seller of the option receives the strike price. 
B)  seller of the option receives the option premium. 
C)  buyer of the option sells the underlying asset and receives the option premium. 
D)  buyer of the option pays the option premium and receives the underlying asset. 
E)  seller of the option must buy the underlying asset and pay the strike price.

Question 12

You want the right, but not the obligation, to sell 600 shares of ZZ Industries stock at a price of $35 a share. How much will it cost you to establish this option position?

Accepted Answer

A)  $422 
B)  $408 
C)  $360 
D)  $378 
E)  $382

Question 13

Briefly compare and contrast options and futures.

Accepted Answer

The answer of Briefly compare and contrast options and futures....

Question 14

You purchased 500 shares of SLG, Inc. stock at a price of $40.20 a share. You then purchased put options on your shares with a strike price of $47.50 and an option premium of $1.90. At expiration, the stock was selling for $48.30 a share. You sold your shares on the option expiration date. What is your net profit or loss your transactions related to SLG, Inc. stock?

Accepted Answer

A)  $2,650 
B)  $2,250 
C)  $3,100 
D)  $3,550 
E)  $3,700

Question 15

What was the prior day's closing price on the 50 call option on JL stock?

Accepted Answer

A)  $4.45 
B)  $4.75 
C)  $5.05 
D)  $5.10 
E)  $5.30

Question 16

You would like to lock in the selling price on 55,000 bushels of wheat, which you plan to harvest and deliver to the market in September. The September futures price quote is currently 912΄6. If you write September futures contracts on your wheat, you will be guaranteed a total price of _____ for your crop. Each contract is quoted in cents and 1/8 ths of a cent per bushel with a contract size of 5,000 bushels.

Accepted Answer

A)  $45,637.50 
B)  $502,012.50 
C)  $11,908.75 
D)  $297,700.50 
E)  $2,977,000.25

Question 17

You bought five call option contracts with a strike price of $47.50 and an option premium of $1.20. At expiration, the stock was selling for $51.30 a share and you exercised your option. What is your total cost basis in the acquired shares?

Accepted Answer

A)  $23,150 
B)  $25,050 
C)  $23,750 
D)  $24,350 
E)  $26,250

Question 18

You purchased four August 09 futures contracts on soybeans at a price quote of 1156'6. Each contract is for 5,000 bushels with the price quoted in cents and 1/8 ths of a cent per bushel. Assume the contract price is 116'4 when you close out your contract six weeks from now. What will be your total profit or loss on this investment?

Accepted Answer

A)  $950 
B)  -$238 
C)  $6,480 
D)  $16,200 
E)  $24,000

Question 19

Julie was lucky enough to purchase two September 08 futures contracts on soybeans when the contracts were at the lowest price of the day. What is Julie's total profit or loss as of the end of the day?

Accepted Answer

A)  $25.00 
B)  $50.00 
C)  $60.00 
D)  $250.00 
E)  $260.00

Question 20

Riverside Metals recently issued some debt that had an original maturity of nine months. This debt is best classified as a(n):

Accepted Answer

A)  option contract. 
B)  money market instrument. 
C)  fixed-income security. 
D)  derivative security. 
E)  futures contract.

Exam 3: Overview of Security Types