Question 1

Which of the following is an example of a put option which is in the money?

Accepted Answer

A) The option to sell at $11,the stock is worth $12. 
B) The option to buy at $13,the stock is worth $12. 
C) The option to buy at $12,the stock is worth $12. 
D) The option to sell at $13,the stock is worth $12. 
E) The option to buy at $11,the stock is worth $12.

Question 2

Which of the following is not an input to the Black and Scholes model?

Accepted Answer

A) earnings per share 
B) stock price 
C) risk free rate 
D) volatility

Question 3

The right for existing owners to maintain their ownership share by purchasing sufficient shares to keep their percentage share of the firm is called:

Accepted Answer

A) stock option 
B) stock warrant 
C) preemptive right 
D) participating stock 
E) paid-in-kind preferred stock

Question 4

The Black and Scholes model requires the stock price as an input.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following have the least senior claim on a venture's asset?

Accepted Answer

A) common Stock 
B) preferred stock 
C) convertible preferred stock 
D) convertible debt 
E) American-style option

Question 6

An option is a right to buy or sell additional shares of stock.

Accepted Answer

A) True 
 B)False

Question 7

The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.

Accepted Answer

A) True 
 B)False

Question 8

The right to sell a specified asset at a specified price up until a specified date is called:

Accepted Answer

A) a forward contract 
B) an American-style put option 
C) an American-style call option 
D) a European-style call option 
E) a European style put option

Question 9

The Black and Scholes model is intended to be used to value

Accepted Answer

A) stocks 
B) bonds 
C) options 
D) futures contracts

Question 10

The unadjusted Black and Scholes model is a model for determining the value of a warrant to buy a new share.

Accepted Answer

A) True 
 B)False

Question 11

The value of a warrant can be directly derived from the value of a call option.

Accepted Answer

A) True 
 B)False

Question 12

If a call option can be bought for $12 and the stock's market value is $12,it's said to be "at the money".

Accepted Answer

A) True 
 B)False

Question 13

A call option is the obligation to purchase a specific asset at a pre-determined price.

Accepted Answer

A) True 
 B)False

Question 14

Generally speaking,warrants are call options that allow the holder to purchase what type of security at a specific price?

Accepted Answer

A) common stock 
B) preferred stock 
C) convertible debt 
D) none of the above

Question 15

An option that can be exercised only at a specific set of dates is called a:

Accepted Answer

A) forward contract 
B) lookback option 
C) American-Style option 
D) European-Style option 
E) Bermuda-Style option

Question 16

A European-Style Option may only be exercised on a specific date.

Accepted Answer

A) True 
 B)False

Question 17

Options generally have no effect on the value of a venture capital investment.

Accepted Answer

A) True 
 B)False

Question 18

To calculate the enterprise valuation cash flow,one begins with which of the following items from the income statement?

Accepted Answer

A) net sales 
B) operating profit 
C) (earnings before interest and taxes)× (1 - enterprise tax rate) 
D) net income 
E) net income times the enterprise tax rate

Question 19

An option that can be exercised at any time until its expiration is called a:

Accepted Answer

A) forward contract 
B) lookback option 
C) American-style option 
D) European-style option 
E) Bermuda-style option

Question 20

Preferred stock is the equity claim senior to common stock providing preference on dividends but not liquidation proceeds.

Accepted Answer

A) True 
 B)False

Exam 14: Security Structures and Determining Enterprise Values

Which of the following is an example of a put option which is in the money?

Which of the following is not an input to the Black and Scholes model?

The right for existing owners to maintain their ownership share by purchasing sufficient shares to keep their percentage share of the firm is called:

The Black and Scholes model requires the stock price as an input.

Which of the following have the least senior claim on a venture's asset?

An option is a right to buy or sell additional shares of stock.

The enterprise method of valuation can be executed with either an after-tax or before-tax weighted cost of capital as long as the rate is applied to the appropriate enterprise cash flows.

The right to sell a specified asset at a specified price up until a specified date is called:

The Black and Scholes model is intended to be used to value

The unadjusted Black and Scholes model is a model for determining the value of a warrant to buy a new share.

The value of a warrant can be directly derived from the value of a call option.

If a call option can be bought for $12 and the stock's market value is $12,it's said to be "at the money".

A call option is the obligation to purchase a specific asset at a pre-determined price.

Generally speaking,warrants are call options that allow the holder to purchase what type of security at a specific price?

An option that can be exercised only at a specific set of dates is called a:

A European-Style Option may only be exercised on a specific date.

Options generally have no effect on the value of a venture capital investment.

To calculate the enterprise valuation cash flow,one begins with which of the following items from the income statement?

An option that can be exercised at any time until its expiration is called a:

Preferred stock is the equity claim senior to common stock providing preference on dividends but not liquidation proceeds.