1 Up votes0 Down votes

2.8K views4 pagesfin4

Oct 30, 2013

© Attribution Non-Commercial (BY-NC)

DOC, PDF, TXT or read online from Scribd

fin4

Attribution Non-Commercial (BY-NC)

2.8K views

fin4

Attribution Non-Commercial (BY-NC)

- ch05
- Test Bank for Derivatives Markets 3rd Edition by McDonald
- Solution Ch 1
- Chap 018
- Derivatives Markets by McDonald
- 67180098 Derivative Markets Solutions
- Derivative Markets Solutions`
- Derivatives Test Bank
- derivatives.pdf
- A&J Questions Bank (Derivatives Markets) for SOA Exam FM/ CAS Exam 2
- Quiz_1_Solution
- Chap 006
- MFE manual
- FE
- Chap 008
- Fin512 习题1
- Deeper Understanding Fall 08 Manual for FM
- ACT2020 FINAL EXAM - 07
- Full Report - Thu Trang
- 8a.equity Valuation Models_Text Bank(1)_Solution

You are on page 1of 4

1 Multiple Choice 1) A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, what is the profit or loss at expiration (in 6 months) if the market index is $810? A) $20.00 gain B) $18.65 gain C) $36.29 loss D) $43.76 loss Answer: D 2) A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, compute the profit or loss from the long index position by itself expiration (in 6 months) if the market index is $810. A) $45.21 loss B) $21.22 loss C) $18.00 gain D) $24.25 gain Answer: A 3) A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, compute the profit or loss from the long put position by itself (in 6 months) if the market index is $810. A) $3.45 gain B) $1.45 gain C) $2.80 loss D) $1.36 loss Answer: B 4) A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, what is the estimated price of a call option with an exercise price of $830? A) $42.47 B) $45.26 C) $47.67 D) $49.55 Answer: A (830+18)*1.005^6-830 ri chia cho 1.005^6

5) A strategy consists of longing a put on the market index with a strike of 830 and shorting a call option on the market index with a strike price of 830. The put premium is $18.00 and the call premium is $44.00. Interest rates are 0.5% per month. Determine the net profit or loss if the index price at expiration is $830 (in 6 months). A) $0 B) $23.67 loss C) $26.79 gain D) $28.50 gain Answer: C 6) A strategy consists of longing a put on the market index with a strike of 830 and shorting a call option on the market index with a strike price of 830. The put premium is $18.00 and the call premium is $44.00. Interest rates are 0.5% per month. What is the breakeven price of the market index for this strategy at expiration (in 6 months)? A) $802.12 B) $830.00 C) $855.21 D) $866.32 Answer: C sai p n 856.79 7) At the 6-month point, what is the breakeven index price for a strategy of longing the market index at a price of 830? Interest rates are 0.5% per month. A) $802.12 B) $830.00 C) $855.21 D) $866.32 Answer: C 8) The $850 strike put premium is $25.45 and the $850 strike call is selling for $30.51. Calculate the breakeven index price for a strategy employing a short call and long put that expires in 6 months. Interest rates are 0.5% per month. A) $822.67 B) $824.79 C) $830.76 D) $875.82 Answer: B 9) What is the maximum profit that an investor can obtain from a strategy employing a long 830 call and a short 850 call over 6 months? Interest rates are 0.5% per month. A) $6.80 B) $7.68 C) $9.24 D) $12.32 Answer: B

10) What is the maximum loss that an investor can obtain over 6 months from a strategy employing a long 830 call and a short 850 call? Interest rates are 0.5% per month. A) $6.80 B) $7.68 C) $9.24 D) $12.32 Answer: D 11) What is the breakeven point that an investor can obtain from a 6-month strategy employing a long 830 call and a short 850 call? Interest rates are 0.5% per month. A) $832.82 B) $842.32 C) $852.22 D) $862.92 Answer: B 12) The owner of a house worth $180,000 purchases an insurance policy at the beginning of the year for a price of $1,000. The deductible on the policy is $5,000. If after 6 months the homeowner experiences a casualty loss valued at $45,000, what is the homeowner's net gain/loss? Assume an opportunity cost of capital of 4.0% annually. A) $0 B) $1,000 C) $5,000 D) $6,020 Answer: D 13) Using option strategy concepts, what is the value of an insured home, if the value of the uninsured home is $220,000, the house was purchased for $180,000 and the house has a casualty policy costing $500 with a $2,000 deductible? Ignore interest costs. A) $180,000 B) $217,500 C) $220,000 D) $222,500 Answer: B 14) An investor purchases a call option with an exercise price of $55 for $2.60. The same investor sells a call on the same security with an exercise price of $60 for $1.40. At expiration, 3 months later, the stock price is $56.75. All other things being equal and given an annual interest rate of 4.0%, what is the net profit or loss to the investor? A) $1.21 loss B) $1.50 loss C) $0.54 gain D) $1.65 gain Answer: C

3.2 Short Answer Essay Questions 1) Explain how a long stock and long put strategy equals the cash flow from a long call strategy. Answer: The net effect of the long put and long stock creates a cash flow identical to the long call, provided you include the cost of funds. 2) Why might the manager of a portfolio employ a protective put strategy? Answer: If the manager desires to protect against a price decline, but is restricted from selling assets, a long put creates a floor below which losses cannot occur. 3) What is the difference between naked and covered call writing? Answer: A covered position is one in which the individual also owns the underlying asset in addition to the short call. A naked position involves writing the call alone. 4) What are the similarities and differences between bear and bull spreads? Answer: Both have floors and ceilings. The bear position has a ceiling where prices are falling and a floor where prices rise. A bull spread has the opposite floor and ceiling. 5) Why is a straddle position considered a speculation on the asset's volatility? Answer: The strategy loses money if prices stay constant, but benefits from large changes in prices, either up or down. 3.3 Class Discussion Question 1) Compare the butterfly spread, bear spread, bull spread, covered call, straddle, and other strategies. Is any one strategy better than another? Are there trade-offs between each that is almost perfect or do significant advantages exist from one strategy to another?

- ch05Uploaded bydain0191
- Test Bank for Derivatives Markets 3rd Edition by McDonaldUploaded bySidharth Choudhary
- Solution Ch 1Uploaded byWei Seong
- Chap 018Uploaded byXeniya Morozova Kurmayeva
- Derivatives Markets by McDonaldUploaded byTiffany Holland
- 67180098 Derivative Markets SolutionsUploaded bynk7350
- Derivative Markets Solutions`Uploaded byKamy Zhu
- Derivatives Test BankUploaded byNoni Alhussain
- derivatives.pdfUploaded byendu wesen
- A&J Questions Bank (Derivatives Markets) for SOA Exam FM/ CAS Exam 2Uploaded byanjstudymanual
- Quiz_1_SolutionUploaded byPritesh Gehlot
- Chap 006Uploaded byLuqman Ahmed
- MFE manualUploaded byashtan
- FEUploaded byThaddee Nibamureke
- Chap 008Uploaded byKen White
- Fin512 习题1Uploaded byBiao Wang
- Deeper Understanding Fall 08 Manual for FMUploaded byAbdur Rehman
- ACT2020 FINAL EXAM - 07Uploaded byOlivia Iu
- Full Report - Thu TrangUploaded byNguyen Thi Tina
- 8a.equity Valuation Models_Text Bank(1)_SolutionUploaded byvbnarwade
- Derivatives MarketsUploaded byTichaona Chiwandamira
- StarbucksUploaded byTony Hancook
- 180090578-chapter-3-docUploaded byMỹ Dung Pnt
- Introduction to derivativeUploaded byThuhoai Nguyen
- An Introduction to Forwards and OptionsUploaded byThuhoai Nguyen
- FG2233Uploaded byHassan Sheikh
- 03 Risk Management Applications of Option StrategiesUploaded byTejas Joshi
- Exams PEOUploaded bycatsss
- 1598Uploaded byNo Names

- Robbins Chapter06Uploaded byMai Anh Everlasting
- Minna No Nihongo I - ChoukaiUploaded byBình Phạm Thanh
- Chap007 Sampling aaUploaded byThiện Thảo
- MIS chapter 14Uploaded byThiện Thảo
- M01_ABEL4987_7E_IM_C01Uploaded byMk Kong
- Micro Ch20 LecnotesUploaded byThiện Thảo
- MIS chapter 15Uploaded byThiện Thảo
- 3 mo hinh.pdfUploaded byThiện Thảo
- Business CycleUploaded byThiện Thảo
- equity swaps.docUploaded byThiện Thảo
- CH 9 Foundations of Group BehaviorUploaded byKatherine
- Robbins Chapter15Uploaded byThiện Thảo
- Robbins Chapter04Uploaded byMai Anh Everlasting
- Micro Ch14 LecnotesUploaded byThiện Thảo
- Micro Ch16 LecnotesUploaded byThiện Thảo
- Micro Ch17 LecnotesUploaded byThiện Thảo
- Micro Ch18 LecnotesUploaded byThiện Thảo
- Micro Ch21 LecnotesUploaded byThiện Thảo
- Micro Ch22 LecnotesUploaded byThiện Thảo
- Micro Ch11 LecnotesUploaded byThiện Thảo
- Micro Ch09 Lecnotes 6eUploaded byThiện Thảo
- Micro Ch08 Lecnotes 6eUploaded byThiện Thảo
- Micro Ch02 LecnotesUploaded byThiện Thảo
- Micro Ch01 LecnotesUploaded byThiện Thảo
- Chapter 2 QuizUploaded byThiện Thảo
- Robbins Chapter02Uploaded byMai Anh Everlasting
- ch01Uploaded byThiện Thảo

- Comparing Models of Corporate Bankruptcy Prediction - Distance to Default vs. Z-ScoreUploaded byvidovdan9852
- Rixson Price Book 2012Uploaded bySecurity Lock Distributors
- DG300Uploaded by654321
- Renaissance Avoided More Than $6 Billion Tax, Report Says - BloombergUploaded bydrewmx
- Kraft HeinzUploaded byAnonymous 6f8RIS6
- Microsoft Word - CEV633 Tutorial - Chp 1.docx.pdfUploaded bymuhammad
- ILO Financial EducationUploaded bycamitercero7830
- Finance GlossaryUploaded byrisingarsal
- NCFM SMBM QuestionsUploaded bylifeee
- CA Final SFM and CMA Final AFM Formulae Chart.pdfUploaded byvssutsinha90
- HoltLaury AER 2002Uploaded byNi Hil
- Internatio-Rotterdam, Inc. v. River Brand Rice Mills, Inc., 259 F.2d 137, 2d Cir. (1958)Uploaded byScribd Government Docs
- 6. Value-at-Risk.pptUploaded byAqeel Ahmad Khan
- Derivatives PPTUploaded bymugdha.ghag3921
- Investment BankingUploaded byshrayn
- Real OptionsUploaded bySiddharth Kothari
- SCRA - ICSIUploaded bygauravkgoyal17
- Benett.kennedy-Quanto With CopulaUploaded byantonio.jr.castagna3291
- Bjaj Auto FinanceUploaded byvishnu0751
- Reliance ProjectUploaded byaman_dia
- Zechner Low-risk AnomaliesUploaded byY
- International Marketing Study Note 1Uploaded byJeong Ho Choi
- BB Options Tutorial1Uploaded bysudhakarhere
- Ey Quant MasterclassUploaded byDialid Santiago
- Employee Participation- Weiler, AnniUploaded byTH_2014
- McDonald ISM3e Chapter 3Uploaded byTuan Nca
- g.r. No. 135929 April 20, 2001 Limson vs CAUploaded byrodolfoverdidajr
- Theory and Practice in Aircraft Financial EvaluationUploaded byTitevitch
- The Impact of Default Risk on Prices of Options and Other Derivative SecuritiesUploaded bymatevzek
- COMPREHENSIVE_TOPICS_HANDOUTS.docxUploaded byGrace Corpo

## Much more than documents.

Discover everything Scribd has to offer, including books and audiobooks from major publishers.

Cancel anytime.