26, The general theory of dollar cost averaging is

A) to sell as markets decline and buy as they begin to rise.

B) to time the market to take advantage of low stock prices.

C) to equal the performance of market averages at the lowest dollar cost.

D) to buy more stock when prices are low and less when prices are high.

27,Shares of Lakewood, Inc. are currently selling for $52.63. You believe the stock will decline in price

ranging from $30 to $32 in the next few months. Which of the following strategies will allow you to

profit if your prediction is correct?

I. short the stock

II. buy a call at 50

III. write a call at 55

IV. buy a put at 45

A) III and IV only B) II and IV only

C) I and III only D) I, III and IV only

28, Mathew simultaneously sold a July 40 put on ZXY stock for $200 and bought a July 35 put for $75.

His maximum loss is ________ and his maximum gain is ________.

A) $375, $125 B) $500, $125 C) $275, $125 D) $375, unlimited

29,Matt owns 500 shares of IKM stock. The market price of IKM is $51.74. Matt just sold five calls on

IKM with a strike price of $50. This is known as

A) covering a short position. B) creating a naked cover.

C) writing a covered call. D) writing a naked call.

30, Jason purchased a six -month put on ABC stock at a cost of $100. The strike price was $15. At what

market price does Jason just break-even on this investment? Ignore transaction costs and taxes.

A) $16

B) $14

C) $15

D) Cannot be determined from the information provided

31, Allison bought 100 shares of MIKO, Inc. stock at a price of $35 a share. In addition, she bought a 35

put on MIKO at a cost of $125. Which of the following are true about Allison's position from now

until the option expiration date?

I. Her maximum loss is $3,625.

II. Her maximum loss is $125.

III. Her minimum gain is $125.

IV. Her maximum profit is unlimited.

A) II and IV only B) I and IV only

C) II, III and IV only D) II and III only

32, Steve bought 300 shares of stock at a price of $20 per share. The price of the stock then went up to

$33 per share so Steve decided to hedge his position by purchasing 3 puts at a cost of $120 each.

The puts have an exercise price of 30. One week prior to the expiration of the puts, the price of the

stock was at $22 per share. If Steve closed out all of his positions at that time, he would have earned

a net profit of

A) $200. B) $3,000. C) $2,640. D) $240.

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

33) All futures contracts are traded on a margin basis.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

34) To hedge a bond portfolio against rising interest rates, an investor should

A) buy Treasury Notes B) buy a stock-index future.

C) sell interest rate futures. D) buy interest rate futures.

40) What is the time premium of a put with a strike price of $25 when the option price is $2 and the

underlying common stock sells for $24?

A) $300 B) $100 C) $400 D) $200

41) The tendency of investors to take greater risks after a large loss and fewer risks after a large gain

can be attributed to

A) overconfidence. B) representativeness.

C) loss aversion. D) the "house money" effect.

THANK YOU!