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You are on page 1of 14

A)

taken a "long" position in a futures contract.

B)

"marked to market" a futures contract.

C)

sold a call option.

D)

bought a call option.

E)

exercised a call option.

Bank-Ten promises to pay Bank-Nine a fixed rate of interest, on a $10 million dollar principal amount. In

exchange for this, Bank-Nine promises to pay Bank-Ten a floating rate of interest on the same $10 million

dollar principal. This is a/an:

A)

call option contract

B)

put option contract

C)

interest rate swap

D)

futures market transaction

E)

collar

A futures contract will have its price adjusted each day of the contract's lifeeither up or down,

depending on current market conditions. This is the essence of:

A)

SEC requirements for futures contracts.

B)

marking to market.

C)

the "cheapest to deliver" option on a futures contract.

D)

initial margin requirements changing on a daily basis.

E)

maintenance margin requirements changing on a daily basis.

A call option exists on the stock of Macroswift Corporation. The exercise price is $45. Right now the call

option can be purchased for $7. Macroswift stock is currently selling for $50 per share. What is the

"intrinsic value" of the call option?

A)

$7

B)

$0

C)

$3

D)

$2

E)

$5

A call option exists on the stock of Macroswift Corporation. The exercise price is $45. Right now the call

option can be purchased for $7. Macroswift stock is currently selling for $50 per share. What is the

current "premium" on the call option?

A)

$7

B)

$0

C)

$3

D)

$2

E)

$5

A put option exists on the stock of Macroswift Corporation. The exercise price is $45. Right now the put

option can be purchased for $1. Macroswift stock is currently selling for $50 per share. What is the

"intrinsic value" of the put option?

A)

$1

B)

$0

C)

$9

D)

$6

E)

$5

In a call option contract, the price at which the option owner can buy the underlying stock is called the:

A)

option's premium

B)

option's exercise price

C)

option's strike price

D)

underlying asset's price

E)

(b) and (c)

Mark entered into a "forward contract," to buy 100 shares of Way-Low Corp. stock, at a price of $5 per

sharein exactly 6 months. Now, the six month period has passed. Way-Low Corp.'s stock is trading at

$7 per share. What are the consequences for Mark?

A)

He has lost $500

B)

He has gained $700

C)

He has lost $200

D)

He has gained $200

E)

He has gained $500

The text shows some real stock option data, taken from a financial news source. One part of the data is

labeled "open interest," which refers to:

A)

the initial premium, when the option contract was first offered.

B)

the premium at the start of the current trading day.

C)

the number of contracts in existence at the opening of the trading day.

D)

the number of contracts that were exercised on the current trading day.

E)

the interest rate paid to finance option purchases.

1

1

Sally has entered into a contract whereby she made a promise to buy 100 shares of Mega Systems stock

for $20 per share, anytime over the next three monthsif another party elects to sell them. Sally has a:

A)

long position in a call option

B)

short position in a call option

C)

long position in a futures contract

D)

long position in a put option

E)

short position in a put option

Ben purchased a call option on an "index" of stocks, and he is only permitted to exercise it on one specific

date, six months from now. Ben has a/an:

A)

short European option

B)

long American option

C)

short forward contract

D)

long European option

E)

short American option

1

2

A _________________ is one who tries to profit from in the futures market by taking positions for very

short periods of timeperhaps just minutes.

A)

scalper

B)

long trader

C)

short trader

D)

forward trader

E)

hedger

1

4

Last month, Mary bought a call option on ABC Corp. stock, having an exercise price of $30. Mary paid $1

for this call. Today, ABC stock is trading at $40 per share. Which of the following is true?

A)

Mary has now realized a $10 profit.

B)

Mary has now realized a $10 loss.

C)

Mary's option is out of the money.

D)

Mary's option is in the money.

E)

Mary has now realized a $9 loss.

Two months ago, Mary bought a call option on ABC Corp. stock, having an exercise price of $30. Mary

paid $1 for this call. Today, ABC stock is trading at $25 per share. Which of the following is true?

A)

Mary has now realized a $5 profit.

B)

Mary has now realized a $5 loss.

C)

Mary's option is out of the money.

D)

Mary's option is in the money.

E)

Mary has now realized a $4 loss.

1

5

A)

B)

C)

D)

E)

1

6

exercise price

strike price

expiration value

time value

(a) and (b)

Forward contracts, futures contracts, and option contracts are all known as:

A)

B)

C)

D)

E)

1

7

spot contracts

common stock securities

preferred contracts

credit securities

derivative securities

In order for Stan to enter into a futures contract, he was required to deposit some up-front funds. This is

the __________________ requirement.

A)

marking to market

B)

cheapest to deliver

C)

initial margin

D)

open interest

E)

leverage

1

8

With futures market contracts, _________________ guarantee(s) all trades, so that default risk is

minimized.

A)

position traders

B)

an organized exchange

C)

day traders

D)

the CFTC

E)

a floor broker

2

0

A)

the exercise price minus the underlying stock price

B)

the underlying stock price

C)

the time value

D)

the underlying stock price minus the exercise price

E)

the exercise price

A)

B)

C)

D)

E)

Federal Reserve

National Association of Securities Dealers

SEC

CBOE

CFTC

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