Three-month call options with strike prices of $60 and $67cost$7 and $4, respectively. What is the maximum gain when a bull spread is created by trading a total of 400 options? A. $400 B. $600 C. $700 D. $800 The current price of a non-dividend-paying stock is $50. Over the next six months it is expected to rise to $56 or fall to $42. Assume the risk-free rate is zero. What is the riskneutral probability of that the stock price will be $56 ? A. 0.57 B. 0.40 C. 0.63 D. 0.50 The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $24. Assume the risk-free rate is zero. An investor sells call options with a strike price of $31. What $ the value of each call option? A. $1.6 B. $2.0 C. $2.5 D. $3.0 The current price of a non-dividend-paying stock is $28. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. An investor sells call options with a strike price of $30. Which of the following hedges the position? A. Buy 0.6 shares for each call option sold B. Buy 0.4 shares for each call option sold C. Short 0.6 shares for each call option sold D. Short 0.4 shares for each call option sold The current price of a non-dividend-paying stock is $40. Over the next year it is expected to rise to $46 or fall to $36. An investor buys put options with a strike price of $39. Which of the following is necessary to hedge the position? A. Buy 0.3 shares for each option purchased B. Sell 0.3 shares for each option purchased C. Buy 0.7 shares for each option purchased D. Sell 0.7 shares for each option purchased A company can invest funds for three years at LIBOR minus 30 basis points. The threeyear swap rate is 4%. What fixed rate of interest can the company earn by using the swap? A. 2.70% B. 3.30% C. 3.70% D. 4.30%