Question 1

A one dollar increase in a stock's price would result in __________ in the call option's value of __________ than one dollar.

Accepted Answer

A)  a decrease; less 
B)  a decrease; more 
C)  an increase; less 
D)  an increase; more

Question 2

The __________ is the stock price minus exercise price,or the profit that could be attained by immediate exercise of an in-the-money call option.

Accepted Answer

A)  intrinsic value 
B)  time value 
C)  stated value 
D)  discounted value

Question 3

Investor A bought a call option and Investor B bought a put option.All else equal if the interest rate increases the value of Investor A's position will ______ and the value of Investor B's position will _______.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 4

The price of a stock put option is __________ correlated with the stock price and __________ correlated with the exercise price.

Accepted Answer

A)  negatively; negatively 
B)  negatively; positively 
C)  positively; negatively 
D)  positively; positively

Question 5

A higher dividend payout policy will have a __________ impact on the value of a put and a __________ impact on the value of a call.

Accepted Answer

A)  negative; negative 
B)  negative; positive 
C)  positive; negative 
D)  positive; positive

Exam 16: Option Valuation

A one dollar increase in a stock's price would result in in the call option's value of than one dollar.

The __________ is the stock price minus exercise price,or the profit that could be attained by immediate exercise of an in-the-money call option.

Investor A bought a call option and Investor B bought a put option.All else equal if the interest rate increases the value of Investor A's position will and the value of Investor B's position will _.

The price of a stock put option is correlated with the stock price and correlated with the exercise price.

A higher dividend payout policy will have a impact on the value of a put and a impact on the value of a call.