A call option gives the holder (Points : 4) the obligation to buy something the right to sell something the right to buy something the obligation to sell something none of the above Question 2. 2. A call option priced at $2 with a stock price of $30 and an exercise price of $35 allows the holder to buy the stock at (Points : 4) $2 $32 $33 $45 $35 Question 3. 3. A put option in which the stock price is $60 and the exercise price is $65 is said to be (Points : 4) in-the-money out-of-the-money at-the-money exercisable none of the above Question 4. 4. Organized options markets are different from over-the-counter options markets for all of the following reasons except (Points : 4) exercise terms physical trading floor regulation standardized contracts credit risk Question 5. 5. The advantages of the over-the-counter options market include all of the following except (Points : 4) customized contracts privately executed freedom from government regulation lower prices none of the above Question 6. 6. The option price is also referred to as the (Points : 4) strike spread premium fee none of the above Question 7. 7. An investor who exercises a call option on an index must (Points : 4) accept the cash difference between the index and the exercise price purchase all of the stocks in the index in their appropriate proportions from the writer immediately buy a put option to offset the call option immediately write another call option to offset none of the above Question 8. 8. What amount must a call writer pay if a cash-settled index call is exercised? (Points : 4) difference between the index level and the exercise price exercise price difference between the exercise price and the index level index level none of the above Question 9. 9. You are the purchaser of a call option with $5 premium and $145 exercise price. You bought this option when the stock price was $120. If the stock price now is $155, what is the net cash flow to you if you exercise? (Points : 4) $10 $5 $30 $35 Question 10. 10. You are the purchaser of a put option where the premium is $4 and exercise price is $52. You bought this option when the stock price was $52. If the stock price is $42 right now, what is your net cash flow? (Points : 4) negative $14 negative $6 $6 $4 Question 11. 11. You wrote a call option with premium of $5 and exercise price of $55. You sold this when the stock price was $45. If the stock price now is $65, what is your net cash flow? (Points : 4) negative $5 $25 $20 $5 negative $10 Question 12. 12. You wrote a put option with a premium of $3 and exercise price of $22. You sold this option when the stock price was $25. If the stock price is $22 now, what is your net cash flow? (Points : 4) $6 $3 negative $3 $0 negative $6 Question 13. 13. The maximum gain of the writer of a put option with a premium of $3 and an exercise price of $120 is: (Points : 4) $120 $117 $3 $123 unlimited Question 14. 14. The maximum gain of the purchaser of a put option with a premium of $3 and exercise price of $120 would be: (Points : 4) unlimited $120 $117 $3 $123 Question 15. 15. The maximum gain of the writer of a call option with a premium of $3 and an exercise price of $120 would be (Points : 4) unlimited $3 $117 $120 $123 Question 16. 16. The maximum gain of the purchaser of a call option with a premium of $3 and an exercise price of $120 would be (Points : 4) unlimited $120 $117 $123 $3 Question 17. 17. You have the following information: Put: X=$40, Premium=$4 Call: X=$50, Premium=$6 You bought the stock at $45 Scenarios: S=20, S=45, S=90 Given above information, please calculate the net payouts for a protective put strategy for each different scenario. (Points : 4) -$9, -$4, $41 $25, $0, $0 -$5, $-9, $0 $16, -$4, $45 Question 18. 18. You have the following information: Put: X=$40, Premium=$4 Call: X=$50, Premium=$6 You bought the stock at $45 Scenarios: S=20, S=45, S=90 Given above information, please calculate the net payouts for a covered call strategy for each different scenario. (Points : 4) $6, $6, $11 $6, $0, $51 -$19, $6, $11 -$19, $6, $51 -$6, -$6,$45 Question 19. 19. You have the following information: Put: X=$40, Premium=$4 Call: X=$50, Premium=$6 You bought the stock at $45 Scenarios: S=20, S=45, S=90 Given above information, please calculate the net payouts for a collar strategy for each different scenario. (Points : 4) -$3, $2, $7 -$9, $6, $11 $16, $2, $52 -$4, $0, $6 Question 20. 20. You have the following information: S=65, X=60, T=1, r=0, C=7, P=4 Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy? (Points : 4) Sell Call, Buy Put, Short Stock, Invest remainder Sell Call, Buy Put, Buy Stock, Borrow remainder Buy Call, Sell Put, Buy Stock, Borrow remainder Buy Call, Sell Put, Short Stock, Invest remainder Buy Call, Sell Put, Short Stock, Borrow remainder Question 21. 21. Given the information and the solution you found for Question #20, what is the arbitrage amount? (Points : 4) If S>X, then $6 and if SX, the arbitrage will be $4 If S>X, then $3 and if SX, then $2 and if SX, the arbitrage will be $2 Question 22. 22. You have the following information: S=26, X=20, T=2, r=3.4%, C=15, P=6 Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy? (Points : 4) Sell Call, Buy Put, Buy Stock, Borrow remainder Sell Call, Buy Put, Short Stock, Invest reaminder Buy Call, Sell Put, Buy Stock, Borrow remainder Buy Call, Sell Put, Buy Stock, Invest remainder Buy Call, Sell Put, Short Stock, Invest remainder Question 23. 23. Using the information and the solution from Question #22, what would be the final arbitrage amount? (approximately) (Points : 4) If S>X or SX then $9, if SX or SX then $3, if SX or S