Quiz 3 – 1 PM

12 Sep 2023
1. Draw the payoff and profit diagram for a long put position given
the following: Exercise price = 20, put option premium = 2. Clearly
label the break-even point. What is the maximum profit and
maximum loss?
2. A call option on GE stock is trading for $5.00. The strike price on
this option is 50.00. The stock is trading at 53. What is the
intrinsic value of the option?
3. A German company plans to import equipment worth $1 million
from the US. What currency risk the company face and how can
this risk be mitigated?
4. What is the difference between credit migration and a credit
event?
Quiz 3 – 2:30 PM
12 Sep 2023
1. Draw the payoff and profit diagram for a short put position given
the following: Exercise price = 20, put option premium = 2. Clearly
label the break-even point. What is the maximum profit and
maximum loss?
2. A call option on GE stock is trading for $5.00. The strike price on
this option is 50.00. The stock is trading at 53. What is the time
value of the option?
3. A German company plans to export equipment worth $1 million to
the US. What currency risk does the company face and how can
this risk be mitigated?
4. Speculator believes that the credit quality of Indian sovereign debt
will deteriorate over the next year. How can the speculator use
credit default swaps to benefit from this view?