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Brian purchases 4 UTV May 35 Call @ 3 and 4 UTV May 35 Put @ 2.-(Answered)

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Question

Brian purchases 4 UTV May 35 Call @ 3 and 4 UTV May 35 Put @ 2. UTV falls to 19. What has Brian gained or lost?

He has lost $2,000.

He has gained $1,400.

He has lost $5,600.

He has gained $4,400.

1. Tony Lee purchases 200 shares of WCC stock at $59 and purchases 2 WCC Apr 50 Puts @4.25. What is Tony?s breakeven point?

$59.25

$55.75

$63.25

$45.75

1. Laura Green purchases 5 XYZ Feb50 Puts @3. What is her maximum profit on the trade?

$25,000

Potentially unlimited

$1,500

$23,500

1. If the stock price is 41, the exercise price is 40, the put price is 1.54, and the Black-Sholes price of put using 0.30 as the standard deviation is 1.11. The implied volatility will be ____.

0.30

lower than the risk-free rate

higher than 0.30

lower than 0.30

1. David Smith purchased 1 NHK Oct 60 Call @4. What is his maximum potential loss?

$5,800

It is unlimited

$5,600

$400

1. Mary Lu purchased 10 call option contracts at a premium of 4. How much did she pay for them?

$250

$4,000

$40

$4

Question 19

1. Consider a binomial world in which the current stock price of 100 can either go up by 10 percent or down by 10 percent. The risk-free rate is 4 percent. Assume a one-period world. What is the theoretical value of the European call with an exercise price of 100?

6.73

2.88

3.00

7.00

Question 20

1. Consider a binomial world in which the current stock price of 100 can either go up by 10 percent or down by 10 percent. The risk-free rate is 4 percent. Assume a two-period world. What is the theoretical value of the European put with an exercise price of 100?

2.05

0.29

6.15

1.97

1. Consider a binomial world in which the current stock price of 100 can either go up by 10 percent or down by 10 percent. The risk-free rate is 4 percent. Assume a two-period world. What is the theoretical value of the American call with an exercise price of 100?

9.89

9.62

9.51

6.73

1. Consider a binomial world in which the current stock price of 100 can either go up by 10 percent or down by 10 percent. The risk-free rate is 4 percent. Assume a two-period world. What is the theoretical value of the American put with an exercise price of 105?

4.33

3.08

5.00

5.49

1. A European put option on a stock priced at $50 has a price of $3. The present value of the exercise price of the option is $49. The stock is not expected to pay a dividend. What must be the price of an identical call option on the same stock?

$3.00

$4.00

$1.00

$2.00

1.Which of the following statements is TRUE?

I. A market in which the price equals the true economic value is efficient.

II. The positive relationship between risk and return is called market efficiency.

II

I

Both I and II are not true.

Both I and II are true.

1. On March 2, a Treasury bill expiring on March 21 had a bid discount of 3.61, and an ask discount of 3.59. What is the best estimate of the risk-free rate for the option contract expires on March 22?

3.72 %

3.67%

3.62%

3.60%

2. Question 2

1. Which of the following statements is TRUE?

I. Stocks, bonds, options, and futures are financial assets.

II. All derivatives are based on the random performance of the ?underlying?. The underlying might be an assets, an item,or another derivative.

Both I and II are not true.

I

Both I and II are true.

II

Question 3

1. Which of the following statements is TRUE about the law of one price?

I. The law of one price is violated if the same (identical) good is selling at different prices.

II. The ?one price? that an asset must be is called the ?theoretical value.?

III. A situation involving two identical goods or portfolios that are not priced equivalently would be exploited by arbitrageurs until their prices were equal.

II, III

I, III

I, II

I, II, III

Question 4

1. Which of the following are advantages of derivatives?

I. Lower transaction costs than securities and commodities

II. Reveal information about expected prices and volatility

III. Help control risk

II, III

I, III

I, II

I, II, III

Question 5

1. Which of the following statements is TRUE?

I. The process of selling borrowed assets with the intention of buying them back at a later date and lower price is referred to as a ?repurchase agreement?.

II. Short selling is the process of selling a specified asset to the buyer currently and buying it back at a specified time in the future at an agreed future price.

II

I

Both I and II are true.

Both I and II are not true.

1. Which TWO of the following options are in-the-money if BAC is trading at 62 and DEF is trading at 44?

I. A BAC Oct 60 call option

II. A BAC Oct 70 call option

III. A DEF Aug 40 put option

IV. A DEF Aug 50 put option

II and III

I and IV

I and III

II and IV

1. If ABC stock is trading at $40 and there is a 2-for-1 stock split, the holder of an ABC 45 put contract would now have the right to sell:

50 shares at $80 per share.

200 shares at $22.50 per share.

50 shares at $90 per share.

200 shares at $20 per share.

If HKK stock is trading at $100 and there is a 5% stock dividend, the holder of a HKK 105 put contract would now have the right to sell:

105 shares at $100 per share.

105 shares at $95.24 per share.

100 shares at $110.25 per share.

100 shares at $105 per share.

 

Paper#9209151 | Written in 27-Jul-2016

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