Given the relevant option expires in a years time, which of the following investors in the derivatives market could suffer an immediate loss? a) The writer of an American style call option where the current price of the underlying asset is below the exercise price. b) The writer of a European style put option where the current price of the underlying asset is above the exercise price. c) The writer of a European style call option where the current price of the underlying asset is below the exercise price. d) The writer of an American style put option where the current price of the underlying asset is below the exercise price.

Which of the following criticisms of the various methods of capital project appraisal doesnt hold any validity? a) The payback period is usually less appropriate for projects with long payback periods. b) The net present value ignores the scale of the project. c) Internal rate of return calculations can have multiple answers. d) The nominal returns method is usually less appropriate when the period under consideration is lengthy.

An unsecured company loan stock is currently trading at 119 per 100 nominal. Which of the following is an unlikely explanation for this? a) The unsecured loan stock is shortly to be redeemed at 120% of the par value. b) The issuing companys credit rating is better than what it was at the point of issue. c) The bond was issued with an artificially high coupon rate. d) Interest rates have generally increased since issue.

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