QUESTION 1

The price of an option is also referred to as

	Offset
	Strike price
	Exercise price
	Option premium
	None of the above

QUESTION 2

In general, the following contracts are a type of options EXCEPT

	Convertible bonds
	Forward contracts
	Callable bonds
	Warrants
	All may be considered options

QUESTION 5

Consider a CALL option with the following data: S = 17, E = 20. What is the intrinsic value of this option?

	0
	-3
	3
	None of the above

QUESTION 8

Calculate the time value of the call option

	$2
	$1.50
	$4.75
	$3.25
	None of the above

QUESTION 12

Suppose the underlying stock for an option contract is selling for $30. The option also has a strike price of $30 and will expire in 3 months. Which of the following is true regarding this option? [i] The call option is at the money [ii] The intrinsic value of the call is 0 [iii] The put option is at the money [iv] The intrinsic value of the put is 0 [v] Neither the call nor the put has any time value

	i, iii, iv
	iii, iv, v
	ii, iii, iv, v
	i, ii, iii, iv
	All are correct

QUESTION 14

A CALL option is written on a stock currently selling for $16. The option's strike price is $15 and it expires in 30 days. This option is ______. A meaningful price for this option today is ____

	In-the-money; $1
	Out-of-the money; $1
	Out-of-the money; $15
	In-the money; $2
	None of the above

QUESTION 21

In relating the Black-Scholes Option Pricing Model to the market value of equity, what is the intrinsic value of the "option" if the face value of debt is GREATER than the value of the firm?

	Zero
	Firm value - debt value
	Debt value - firm value
	Negative
	None of the above

QUESTION 22

In relating the Black-Scholes Option Pricing Model to the market value of equity, what is the intrinsic value of the "option" if the face value of debt is LESS than the value of the firm?

	Zero
	Firm value - debt value
	Debt value - firm value
	Negative
	None of the above

QUESTION 27

FOR THIS AND THE NEXT. Suppose you own 100,000 shares of a stock selling for $20 a share. You also purchased a PUT option for each share of stock for $4 per share. Strike price (exercise price) is $20. At option expiration, the stock is selling for $15. What should you do regarding the put?

	Sell the put
	Exercise the put
	Buy more put options to offset the loss on the stock
	Let the put option expire unexercised
	None of the above

QUESTION 28

The transaction above is described as a "protective put hedge." Calculate the hedge profit, given the total number of shares.

	-$100,000
	-$400,000
	-$500,000
	$100,000
	None of the above

QUESTION 29

An option on a stock has the following data: S = $45; E = $43.50; r = 1.75%; T = 55 days; standard deviation = 28%. Using the Black-Scholes model, the following results are obtained: d1 = 0.39051, d2 = 0.28182, N(d1) = 0.652, and N(d2) = 0.611. With all this information, we can conclude that this option is ___. According to the Black-Scholes model, the hedge ratio of this option is ___

	In-the-money; 0.391
	Out-of-the-money; 0.652
	In-the-money; 0.029
	In-the-money; 0.652
	None of the above