Question 1 5 pts Which of the following is not a difference between forward contracts and futures contracts? One is commonly traded at exchanges while the other is not. One is an obligation while the other is not. One requires daily mark-to-market while the other does not. One commonly comes with significant credit risk while the other does not. Question 2 5 pts If the current stock price is $100 and there is a probability of 0.5 that it will rise 10% in price and an equal probability that it will fall 5% in price in 1 month, its current expected price is: (assuming the risk-free rate is 1% per month) equal to its expected price in 1 month. less than its expected price in 1 month. more than its expected price in 1 month. None of the listed choices Question 3 5 pts The put-call parity is a relationship O between the prices of call and put options of the same terms and their underlying asset. between the prices of call options and their underlying asset. U between the prices of put options and their underlying asset. O None of the listed choices Question 4 5 pts Which of the following is not a major factor behind option pricing? Strike price Underlying asset volatility O Underlying asset price Gold price Question 5 5 pts If you are bullish about Microsoft, you would buy a bond issued by Microsoft Apple stock O Microsoft put option Microsoft call option Question 6 5 pts The implied volatility of an European option is the volatility of the underlying asset price None of the listed choices O is the underlying asset volatility input to the Black-Scholes formula that is consistent with its market price is the volatility of the option price Question 7 5 pts An American put option is when compared to a European put option of the same terms. dearer of the same value cheaper O None of the listed choices Question 8 5 pts In using a 3-step binomial model to price an American option that expires in 1 year, the time step is 4 months. 1 month. 3 months. 2 months. Question 9 5 pts Which statement describes a credit derivative? O A derivative that protects the buyer against credit loss of a third party. A derivative where the payoff is made on credit. O A derivative where the buyer makes only one payment at the time when the derivative is bought. O A derivative that is bought on credit. Question 10 5 pts If a wheat farmer has the personal opinion that the weather will turn bad in 6 months and his crops would be affected as a result. To hedge this situation, he should buy wheat futures. sell wheat futures. buy wheat call options. write wheat put options