Question
3.. 1, Which of the following statements is true? Select one: a. It is possible to make conclusions about the value of stock options without
3..
1,
Which of the following statements is true?
Select one:
a. It is possible to make conclusions about the value of stock options without making any assumption about the volatility of stock prices.
b. The put-call parity also hold for American options
c. The value of a call generally increases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.
d. The value of a put generally decreases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.
2.
Which of the following describes a long position in an option?
Select one:
a. A position that has been held for a long time
b. A position where an option has been purchased
c. A position where there is more than five years to maturity
d. A position where there is more than five years to maturity
3.
Fill in the blank in the following statement:
If an option price is _____ the upper bound or below the lower bound, there are profitable opportunities for arbitrageurs.
Select one:
a. equal to
b. below
c. above
d. None of those above
4.
Fill the blanks in the following sentence:
Putcall parity is a relationship between the _____, c, of a European call option on a stock and the price, p, of a European put option on a stock.
Select one:
a. bid
b. offer
c. price
d. volume
5.
In which of the following cases is an asset NOT considered constructively sold?
Select one:
a. The owner shorts a futures contract on the stock
b. The owner shorts a forward contract on the asset
c. The owner buys an in-the-money put option on the asset
d. The owner shorts the asset
6.
Which of the following statements is false?
Select one:
a. The risk-free interest rate does not heavily affect the price of an option.
b. Stock prices tend to increase (decrease) when interest rates fall (rise).
c. The value of a call option is negatively related to the size of any anticipated dividends.
d. Stock prices tend to increase (decrease) when interest rates rise (fall).
7.
Which of the following describes a short position in an option?
Select one:
a. A position in an option lasting less than three months
b. A position in an option lasting less than one month
c. A position where an option has been sold
d. A position in an option lasting less than six months
8.
Fill in the blank in the following text:
"If interest rates in the economy increase, the expected return required by investors from the stock market is likely to ______. "
Select one:
a. stay the same
b. balance
c. decrease
d. increase
9.
A trader buys a call and sells a put with the same strike price and maturity date. What is the position equivalent to?
Select one:
a. a long forward
b. a short forward
c. buying the asset
d. None of the above answers
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