Fin 534
Question 1
Call options on XYZ Corporation’s common stock trade in the market. Which of the following statements is most correct, holding other things constant?
Answer
Correct Answer:
The price of these call options is likely to rise if XYZ’s stock price rises. Question 2
Other things held constant, the value of an option depends on the stock's price, the risk-free rate, and the
Correct Answer:
All of the above. Question 3
Which of the following statements is CORRECT?
Correct Answer:
If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit. Question 4
Which of the following statements is CORRECT?
Correct Answer:
If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit. Question 5
An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?
Correct Answer:
Covered
Question 6
An option that gives the holder the right to sell a stock at a specified price at some future time is
Correct Answer: a put option. Question 7
2 out of 2 points The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?
Correct Answer:
$2.99
Question 8
2 out of 2 points The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells for $7.20.
Call options on XYZ Corporation’s common stock trade in the market. Which of the following statements is most correct, holding other things constant?
Answer
Correct Answer:
The price of these call options is likely to rise if XYZ’s stock price rises. Question 2
Other things held constant, the value of an option depends on the stock's price, the risk-free rate, and the
Correct Answer:
All of the above. Question 3
Which of the following statements is CORRECT?
Correct Answer:
If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit. Question 4
Which of the following statements is CORRECT?
Correct Answer:
If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit. Question 5
An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?
Correct Answer:
Covered
Question 6
An option that gives the holder the right to sell a stock at a specified price at some future time is
Correct Answer: a put option. Question 7
2 out of 2 points The current price of a stock is $22, and at the end of one year its price will be either $27 or $17. The annual risk-free rate is 6.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?
Correct Answer:
$2.99
Question 8
2 out of 2 points The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells for $7.20.