Fin 401 Practice Exam

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FINANCE 401
RYERSON UNIVERSITY
Final Exam – April 24, 2008 - SOLUTION

Name:__________________________________

Student #:_______________________________

Professor:_______________________________

- Time allowed: 3 hours
- Aids allowed: None except for an 8’1/2” by 11’ double sided cheat sheet and a calculator - The exam is out of 60 marks.
- There are 40 multiple choice questions. Each multiple choice question is worth 1 mark. - The remaining non-multiple choice questions are worth 20 marks. - Answer all multiple choice questions on the marksense sheet. - Answer all non-multiple choice questions in the space provided. - Please put your name, student number, and professor’s name on the front of this exam questionnaire AND at the top of the non-multiple choice section. - Print or write VERY NEATLY. If I can’t read your writing, your answers won’t get marked.

1. You buy 15 wheat futures contracts when the price is $2.61 per bushel (each contract is for 5,000 bushels). The price on the maturity date is $2.21. What is your payoff?

a) -$30,000
b) -$2,000
c) $0
d) $2,000
e) $30,000

2. You sell 10 gold futures contracts when the futures price is $342.70 per ounce (each contract is for 100 ounces). The price on the maturity date is $302.30. What is your payoff? a) -$40,400

b) -$4,040
c) $404
d) $4,040
e) $40,400

3. You buy one futures contract for 5,000 bushels of soybeans with a settlement price of $6.92 per bushel. If the price is $7.58 per bushel at the contract expiration, what is your payoff? a) -$37,900

b) -$3,300
c) $2,130
d) $3,300
e) $37,900

4. You purchased a May American call option on Netscape stock with an exercise price of $165. Which of the following statements is true? a) You have the right to buy Netscape shares for $165 at any time prior to the option expiration, regardless of the stock’s market price. b) You are obligated to buy Netscape shares for $165 when the option expires in May, regardless of the stock’s market price. c) You have the right to sell Netscape shares for $165 at any time prior to the option expiration in May, regardless of the stock’s market price. d) You are obligated to sell Netscape shares for $165 when the option expires in May, regardless of the stock’s market price. e) You have the right to buy Netscape shares for $165 at any time prior to the option expiration in May, but only if the stock’s market price is less than $165.

Use the following information to answer the next SIX questions.

Option
OutTel Call Put |Share Price |Strike |Exp. |Vol. |Last |Vol. |Last | |25 |20.0 |Jan. |101 |6 |69 |1 | |25 |20.0 |Feb. |79 |7 |54 |2 | |25 |22.5 |Mar. |65 |5 |40 |4 |

5. You want to purchase one February call contract option on the stock. The contract with a $20 exercise price will cost you _________. (Ignore transactions costs.)

a) $100
b) $200
c) $500
d) $600
e) $700

6. What is the market value per share of the March call?
a) $4
b) $5
c) $6
d) $7
e) $12

7. What is the intrinsic value per share of the January call? a) $0.00
b) $1.00
c) $5.00
d) $6.00
e) $7.00

8. What is the intrinsic value per share of the March put? a) $0.00
b) $1.00
c) $1.50
d) $2.00
e) $4.00...
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