Professional Documents
Culture Documents
is risk-free
has high expected returns
is organized
is efficient
all of the above
6. Which of the following trade on organized exchanges? (Points :1)
caps
forwards
options
swaps
none of the above
7. Which of the following markets is/are said to provide price
discovery? (Points :1)
futures
forwards
options
a and b
b and c
8. Investors who do not consider risk in their decisions are said to be
(Points :1)
speculating
short selling
risk neutral
traders
none of the above
9. Which of the following statements is not true about the law of one
price (Points :1)
17. If the market maker will buy at 4 and sell at 4.50, the bid-ask
spread is (Points :1)
8.50
4.25
0.50
4.00
none of the above
18. Which of the following is a legitimate type of option order on the
exchange? (Points :1)
purchase order
limit order
execution order
floor order
all of the above
19. The exercise price can be set at any desired level on each of the
following types of options except (Points :1)
FLEX options
equity options
over-the-counter options
all of the above
none of the above
20. An investor who owns a call option can close out the position by
any of the following types of transactions except (Points :1)
exercise
offset
expiring out-of-the-money
buying a put
none of the above
(Points :1)
S&P 500
Nikkei 225
Technology Index
New York Stock Exchange Index
none of the above
30.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the intrinsic value of the December 115 put? (Points :1)
1.75
0.00
3.90
3.00
none of the above
31.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the intrinsic value of the November 105 put? (Points :1)
0.30
8.25
8.50
0.00
none of the above
32.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the intrinsic value of the January 110 call? (Points :1)
0.00
8.30
3.75
5.00
none of the above
33.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the intrinsic value of the November 115 call? (Points :1)
1.50
0.00
2.80
1.75
none of the above
34.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the time value of the December 105 put? (Points :1)
1.30
8.30
0.00
7.00
none of the above
35.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the time value of the November 115 put? (Points :1)
1.75
2.80
1.10
0.00
none of the above
36.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the time value of the November 110 call? (Points :1)
0.00
4.40
1.15
3.25
none of the above
37.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the time value of the January 115 call? (Points :1)
5.30
0.00
3.50
1.70
none of the above
38.
The following quotes were observed for options on a given stock on November 1 of a
given year. These are American calls except where indicated. Use the information
to answer questions 30 through 38.
Calls
Puts
Strike
Nov
Dec
Jan
Nov
Dec
Jan
105
8.4
10
11.5
5.3
1.3
110
4.4
7.1
8.3
0.9
2.5
3.8
115
1.5
3.9
5.3
2.8
4.8
4.8
The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50
percent (December) and 7.62 percent (January). The times to expiration were
0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no
dividends unless indicated
What is the European lower bound of the December 105 call? (Points
:1)
9.86
0.00
8.25
9.26
none of the above
39. The time value of an option is also referred to as the (Points :1)
synthetic value
strike value
speculative value
parity value
none of the above
44. When puts are priced with the binomial model, which of the
following is true? (Points :1)
the puts must be American
the puts cannot be properly hedged
the puts will violate put-call parity
the hedge ratio is one throughout the tree
none of the above
45. If the binomial model is extended to multiple periods for a fixed
option life, which of the following adjustments must be made? (Points
:1)
the up and down factors must be increased
the risk-free rate must be increased
the up and down factors and the risk-free rate must be
decreased
the initial stock price must be proportionately reduced
none of the above
46. Which of the following are not path-dependent options when the
stock pays a constant dividend yield? (Points :1)
European calls and European puts
European calls and American puts
American puts and European puts
American puts and European calls
none of the above
47. In a non-recombining tree, the number of paths that will occur
after three periods is (Points :1)
three
four
ten
eight
six
5.36
none of the above
54.
Consider a binomial world in which the current stock price of 80 can
either go up by 10 percent or down by 8 percent. The risk-free rate is
4 percent. Assume a two-period world. Answer questions 54 through
56 about a call with an exercise price of 80.
What is the value of the call if the stock goes up, then down? (Points
:1)
0.96
16.80
8.00
0.00
none of the above
55.
Consider a binomial world in which the current stock price of 80 can
either go up by 10 percent or down by 8 percent. The risk-free rate is
4 percent. Assume a two-period world. Answer questions 54 through
56 about a call with an exercise price of 80.
What is the hedge ratio if the stock goes down one period? (Points :1)
0.00
0.0725
1.00
0.73
none of the above
56.
Consider a binomial world in which the current stock price of 80 can
either go up by 10 percent or down by 8 percent. The risk-free rate is
57. In the binomial model, if an option has no chance of expiring outof-the-money, the hedge ratio will be (Points :1)
0.5
infinite
1
0
none of the above