Question 1:

Suppose you own a call option on a stock with a strike price of $20 that expires today. The price of the underlying stock is $15. If you exercise the option and immediately sell the stock, then:

Group of answer choices

you will lose $5.

you will lose $15.

you will earn $15.

you will earn $5.

Question 2:

If the value of the underlying asset is well above the exercise price of a put option, then:

Group of answer choices

it is likely that the option will be exercised by the buyer.

the seller of the option will most likely make a profit.

the exercise price remains constant irrespective of the change in the value of the underlying asset.

the value of the option is directly proportional to the value of the underlying asset.

Question 3:

A put option with a strike price of $20 is expiring today. The stock is currently selling at $25. Based on this information, the put option should not be exercised.

Group of answer choices

True

False

Question 4:

Suppose the current spot price of corn is $20 a bushel. A corn farmer expects to produce 2,000 bushels at the end of the season, and she wants to ensure that she gets at least $18 per bushel. Call options on 1,000 bushels of corn with a strike price of $15 and an expiration date at the end of the season are selling for $3,000. By selling call options on her corn crop, the farmer can guarantee that she gets at least $18 per bushel.

Group of answer choices

True

False

Question 5:

Which of the following changes, everything else held constant, will increase the value of a call option?

Group of answer choices

The price of the underlying asset goes down.

Getting closer to the expiration date (the passage of time)

A higher strike price

The value of the underlying asset becomes more volatile.

Question 6:

Suppose you own a put option on a stock with a strike price of $35 that expires today. The price of the underlying stock is $25. If you purchase the stock and exercise the put option, then:

Group of answer choices

you will earn $25.

you will earn $10.

you will lose $10.

you will lose $25.

Question 7:

Tunerecord Unit Co. stock is currently trading at $24. There are two types of options available on the stock. Call options with a strike price of $24, which expire next year, are currently trading at $9.6. Put options with a strike price of $24, which expire next year, are currently trading for $2.4. Berniss invests $144 in common stock. Jewel invests $144 in the call options. Reynardo invests $144 in the put options. At the end of one year the price of Tunerecord Unit stock is $21.6. Who made the least losses from their investment?

Group of answer choices

Berniss and Jewel tied

Jewel

Reynardo

Berniss