1.The maximum possible value of a call option is

a.zero

b.present value of the strike price

c. its intrinsic value

d.the price of the underlying asset, for example, the stock price

e.none of the above

2.what is the intrinsic value for a CISCO Jan 50 put option when the current market price of a CISCO share is 40?

a.0

b.-10

c.10

d.50

e.none of the above

3.The higher the volatility of the underlying asset, the___will be the premium on a call option

a.Same

b.higher

c.lower

d.not sure

e.none of the above

4.What is the Black-scholes call option price when the volatility of the underlying stock price approaches zero? assuming the underlying stock price is $49, the strike price is $50, the market risk-free interest rate is 0% and the option's maturity is one year

a.0

b.-1

c.+1

d.none of the above

5.Which of the following describes normal backwardation?

a.Sepculators are net long and hedgers are net short

b.speculators are net short and hedgers are net long

c.futures price is expected to rise over time

d.futures price is expected to fall over time

e.a and c

f.a and d

g.b and c

h. b and d

6. according to the cost of carry model

a. basis should always be psitive

b. basis should always be negative

c. basis can be psitive or negative

d. all of the above

e.none of the above

7.the initial value of a futures contract is____

a. the futures price.

b.zero

8. a trader is on the short side of a futures contract. he loses money when the futures price goes___

a.up

b.down