Problem 19 An option that gives the buyer the right, but not the obligation, to buy the underlying stock on or before expiration date is called a. American call b. American put c. European call d. European put Problem 20 You have borrowed money from a bank at the floating interest rate, and you are not happy with the interest rate risk since rates may increase in the future. To hedge, you: a. Sell a swap to pay a fixed interest rate to the counterparty b. Buy a swap to receive a fixed rate from the counterparty c. Sell a swap to receive a fixed rate from the counterparty d. Buy a swap to pay a fixed rate to the counterparty Problem 21 The lower bound for an in-the-money American put option is a. Strike price b. Stock price c. Immediate exercise value d. Zero Problem 22 When stock price is above the call option's strike price, the option is trading in-the-money under which condition? a. If you are the buyer b. If you are the writer c. Unconditionally: the fact S>X is enough d. If (SX) is higher than the option premium