1) A stock is trading at a current price of $100. An investor decides to short 1,000 shares of the stock. The initial margin requirement is 50% and the maintenance margin is 30%.

A. the investor would receive a margin call when the price increases to $115.38

B. the investor would receive a margin call when the price decreases to $71.43

C. the investor would receive a margin call when the variation margin reaches zero

D. the investor would receive a margin call if the stock price is still $100 in the future

17) Which of the following investments does require initial margin?

A. buying a call option

B. buying a put option

C. buying a futures contract

D. none of the above

2) If the underlying asset has a current market price of $40 and the strike price on an option contract on that asset is $45, then:

A. the option is in-the-money if it is a put option

B. the option has $5 of intrinsic value if it is a call option

C. the option has $5 time value if it is a put option

D. all of the above

3) To settle a long call position that is exercised at expiry, you would:

A. receive a cash amount equal to the asset price minus the option strike price

B. pay the strike price and receive the underlying asset

C. both (A) and (B) are possible

D. none of the above

4) Which of the following investments does require initial margin?

A. writing a call option

B. writing a put option

C. shorting a futures contract

D. all of the above

5) If the underlying asset has a current market price of $40 and the strike price on an option contract on that asset is $45, then:

A. the option is in-the-money if it is a call option

B. the option has $0 of intrinsic value if it is a call option

C. the option has $5 time value if it is a call option

D. none of the above

6) If the underlying asset has a current market price of $40 and the strike price on an option contract on that asset is $45, then:

A. the option is in-the-money if it is a put option

B. the option has $0 of intrinsic value if it is a call option

C. the option has $5 intrinsic value if it is a put option

D. all of the above

7) Which of the following investments does NOT require initial margin?

A. writing a call option

B. buying a put option

C. writing a futures contract

D. none of the above, they all do require initial margin

8) Suppose you buy a futures contract on an asset with a futures price of $50. At expiry of the futures contract the market price of the asset is $45:

A. the contract is out-the-money and you would not exercise

B. the contract is in-the-money and you would make a profit

C. the contract is in-the-money, but we dont know if the investment made a profit or loss without knowing the original premium at the time of the trade

D. you would make a loss on the investment