1. If the current stock price (spot price) is greater than the strike price, a call option is ______ and a put option is ______.

• A. in the money; out of the money
• B. out of the money; in the money
• C. in the money; in the money
• D. out of the money; out of the money
• E. at the money; at the money

2.Which of the following are factors used to calculate the price of an option on a stock?

• A. Required return on the stock
• B. Risk-free rate
• C. Strike price
• D. Stock price volatility

3. Which of the following can you purchase option contract on?

• A. Stocks
• B. Stock indexes
• C. Interest rates
• D. Both (A) and (B)
• E. All of the above

4. A bank that suffers from decreasing interest rates would make _____ payments in an interest rate swap in order to hedge; a bank that suffers from increasing interest rates would make _____ payments.

• A. fixed-rate; floating-rate
• B. fixed-rate; fixed-rate
• C. floating-rate; fixed-rate;
• D. floating-rate; floating-rate