1) 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

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 $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

3) 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

4) 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