When the stock price increases with all else remaining the same, which of the following is true? a.Calls increase in value while puts decrease in value 1. Puts increase in value while calls decrease in value Both calls and puts decrease in value i. Both calls and puts increase in value Which of the following is true when dividends are expected? The basic put-call parity formula can be adjusted by adding the present value of expected dividends to the stock price The basic put-call parity formula can be adjusted by subtracting the present value of expected dividends from the stock price The basic put-call parity formula can be adjusted by subtracting the dividend yield from the interest rate a Put-call parity does not hold Moving to the next question prevents changes to this answer. Question 13 The option premium usually is: a. Equal to the sum of intrinsic value and time value b. Greater than the sum of intrinsic value and time value c. Independent of intrinsic value and time value d. Less than the sum of intrinsic value and time value A Moving to the next question prevents changes to this answer, Question 9 If the volatility of a non-dividend paying stock is 20% per annum and a risk-free rate is 5% per annum, which of the following is closest to the upward movement factor u (also known as Cox, Ross, Rubinstein parameter u) for a tree with a three-month time step? 2.1 .05 b. 1.09 C1.10 d.1.07 Moving to the next question prevents changes to this answer. Question 15 When the strike price increases with all else remaining the same, which of the following is true? a. Puts increase in value while calls decrease in value b. Both calls and puts decrease in value c. Both calls and puts increase in value d. Calls increase in value while puts decrease in value Moving to the next question prevents changes to this answer. Question 12 A trader has a portfolio worth \$S million that mirrors the performance of a stock index. The stock index is currently 1,250. Futures contracts trade on the index with one contract being on 250 times the index. To remave market risk from the portfolio the trader should: a. Sell 20 contracts b. Buy 20 contracts C.Sell 16 contracts d. Buy 16 contracts A Moung to the next question prevents changes to this answer. 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 $26. Assume the risk-free rate is zero. What is the (risk-neutral) probability that the stock price will be $36 ? 0.0 .5 b. 0.3 c. 0.4 d. 0.6 Remaining Time: 18 minutes, 17 seconos. Question Completion Status: Moving to the next question prevents changes to this answer. Question Moving to the next question prevents thanges to this a a Question 11 Which of the following can be used to create a long position in a European put option on a stock? a. Sell a call option on the stock and buy the stock b. Buy a call on the stock and short the stock c.Sell a call option on the stock and sell the stock d. Buy a call option on the stock and buy the stock Moving to the next questlon prevents changes to this answer. Moving to the next question prevents changes to this answer. uestion 17 Which of the following creates a bull spread? a. Buy a low strike price call and sell a high strike price call b. Buy a low strike price call and sell a high strike price put c. Buy a low strike price put and sell a high strike price call d. Buy a high strike price call and sell a low strike price call Moving to the next question prevents changes to thls answer. Moving to the next question prevents changes to this answer. Question 18 of 20 uestion 18 1 polnts The price of a stock on February 1 is $124. A trader sells 200 put options on the stock with a strike price of $120 whe n the option price is $5. The options are exercised when the stock price is $110. The trader's net profit or loss is: a. Gain of $1,000 b. Loss of $2,000 c. Loss of $1,000 d. Loss of $2,800 Moving to the next question prevents changes to this answer. Click Submit to complete this assessment. uestion 20 Which of the following best describes the intrinsic value of an option? a. The amount paid for the option b. The lower bound for the option's price c. The value it would have if the owner had to exercise it immediately or not at all d. The Black-Scholes-Merton price of the option Click Submit to complete this assessment. The combination of buying a call and a put option at the same exercise price then it would be a: LBear Spread b. Strangle cstraddle Bullispread Moving to the next question prevents changes to this answer. Question 16 uestion 16 1 points When dividends increase with all else remaining the same, which of the following is true? a. Calls increase in value while puts decrease in value b. Puts increase in value while calls decrease in value c. Both calls and puts increase in value d. Both calls and puts decrease in value Moving to the next question prevents changes to this answer, This test does not allow backtacking. Your answers are saved automatically. Remaining Time: 28 minutes, 22 seconds. Question Completion Status: Moving to the next question prevents changes to this answer. Question 6 When interest rates increase with all else remaining the same, which of the following is true? a.Puts increase in value while calls decrease in value Calls increase in value while puts decrease in value Both calls and puts decrease in value Both calls and puts increase in value Attemes Force Completion This test does not allow backtracking. Changes to the answer after submission are prohibited. Your answers are saved automatically. Remaining Time: 15 minutes, 42 seconds. vuestion Completion Status: A Moving to the next question prevents changes to this answer. Question 14 of 20 Question 14 1 points When volatility increases with all else remaining the same, which of the following is true? a. Both calls and puts decrease in value b. Both calls and puts increase in value c. Puts increase in value while calls decrease in value d. Calls increase in value while puts decrease in value Moving to the next question prevents changes to this answer. - You ara allow Timed fest. Whis test has a time in when hal the time, Muleple ance started this test nust be completed in on forct onts This test does not allow backuacking. your answers are saved ausarnatically. Rerraining Time: 22 minutes, 54 seconds. - Question Completion Status: Question 8 of 20 A Moving to ife next question prevents changes to this answer. 1 points Question 8 A strangle is an investment strategy that combines: a. A call and a put at the same strike price and expiry date IA call and a put for the same expiry date but at different strike prices G. Two pusts and one call with the same expiry date 1. Two calls and one put with the same expiry dates A Mowing to the net question frevents changes to this answer. The price of a stock on July 1 is $57. A trader buys 100 call options on the stock with a strike price of $60 when the o ption price is $2. The options are exercised when the stock price is $65. The trader's net profit is: $.$500 b. $700 c$600 . $300 Remaining Time: 10 minutes, 14 seconds. Question Completion Status: A. Moving to the next question prevents changes to this answer. Question 19 of 20 Question 19 1 points Which of the following creates a bear spread? a. Buy a high strike price call and sell a low strike price call b. Buy a low strike price call and sell a high strike price call c. Buy a low strike price put and sell a high strike price call d. Buy a low strike price call and sell a high strike price put Moving to the next question prevents changes to thls answer. Moving to the next question prevents changes to this answer. Iestion 10 Rolling the hedge forward in a futures contract means that: a. Delivery dates in a futures contract do not matter b. Close one futures contract and take a position in a contract with a later delivery date c. Keep all futures contracts open d. Choose the same delivery date (1) Moving to the next question prevents thanges to this answer. Which of the following is the put-call parity result for a non-dividend-paying stock? O. The European put price plus the European call price must equal the stock price plus the present value of the strike price Ob The European put price plus the stock price must equal the European call price plus the strike price The European put price plus the stock price must equal the European call price plus the present value of the strike price Od The Eutopean put price plus the present value of the strike price must equal the European call price plus the stock price A Moving to the nere guestlo