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27 28 29 19 32 ILI U 23 24 25 26 30 31 Mr. S is a trader who trades in securities market. He always

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27 28 29 19 32 ILI U 23 24 25 26 30 31 Mr. S is a trader who trades in securities market. He always carns a risk-free profit over the period of his investments when trades in two markets where one of the market is always derivatives market. Mr. T trades only in the derivative markets by taking long position in either futures or call options. From this information, 1. Mr. T bets only on price fall of the underlying asset of the derivative he trades. 2. Mr. T always pays an upfront cost to trade in the derivative market. 3. Mr. S is an arbitrageur 4. Mr. S is a hedger MacBook Air 1 V % 5 6 $ 0 4 Y 3 2 Y 7 E R CW W co K D J 26 28 Save An 2J 24 25 29 30 31 32 tiesuon z points On 20-July-1995, Mr. John agrees to sell GBP 1,000,000 to Mr. Julian in six months in exchange of USD. Mr. Julian paid a refundable amount of USD1,000 to Mr. John on 20-July-1995 to decide at maturity whether or not to trade with Mr. John . At the time of contract, the quoted exchange rates are 1 AED -0.2725 USD, 1 USD = 3.6700 AED, 1 GBP-1.19 USD, 1 USD = 0.8303 GBP. 1. Using above info, it is a European put option with strike price 1 AED = 0.2725 USD. 2. Using above info, it is a European call option with strike price 1 USD = 0.8303 GBP. 3. Using above info, it is a European call option with strike price 1 GBP-1.19 USD. 4. None of the above MacBook Air 99 3 8 N & 7 $ 4 % 5 # 3 w 6 0 2 E s T Y 70 E WE * (Q Suppose that an option has a strike price of 'K' and at maturity the market price of the underlying asset is ST. Further suppose that the option is exercised at maturity when spot price is ST. It means that 1. Option holder will trade the underlying asset only at price ST. 2. Option holder will trade the underlying asset only at price K. 3. Option holder can trade the underlying asset both at K and ST. 4. Both 1 & 3. MacBook Air & 7 % 5 8 9 $ 4 6 O { 2 3 T T R E W Q Coru J K G HT D s > A J -C 16 17 18 19 20 21 22 23 24 25 26 27 28 13 32 29 30 31 Mr. Soft writes an option to sell 100 stocks of OMAX, a hypothetical company, at price $14 per share for $0.5 exercisable until the end of 1 year to Mr. Hard. From the above information 1. Mr. Soft holds short position in a European put option. 2. Mr. Soft holds long position in a European put option. 3. Mr. Soft receives the premium of a European call option. 4. None of the above. MacBook Air EN & 7 8 N9 % 5 $ 4 y 0 0 3 2 7 T R E WE Q K co G 3 In a European call option, premium is paid 1. At option expiry. 2. Independent of when the option is exercised until maturity. 3. As a cost of the option. 4. Both 2 & 3 MacBook Air Ono 20 95 FS OSC A # 3 $ 4 % 5 8 & 7 0

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