Preview

Fundamentals of Futures and Options Markets 7e by Hull(Test Bank)

Good Essays
Open Document
Open Document
13529 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Fundamentals of Futures and Options Markets 7e by Hull(Test Bank)
Test Bank: Chapter 1 Introduction 1. List three types of traders in futures, forward, and options markets i. _ _ _ _ _ _ _ _ ii. _ _ _ _ _ _ _ _ iii. _ _ _ _ _ _ _ _ 2. Which of the following is not true (circle one) a. When a CBOE call option on IBM is exercised, IBM issues more stock b. An American option can be exercised at any time during its life c. An call option will always be exercised at maturity if the underlying asset price is greater than the strike price d. A put option will always be exercised at maturity if the strike price is greater than the underlying asset price. 3. A trader enters into a one-year short forward contract to sell an asset for $60 when the spot price is $58. The spot price in one year proves to be $63. What is the trader’s gain or loss? Show a dollar amount and indicate whether it is a gain or a loss. __________ 4. A trader buys 100 European call options (i.e., one contract) with a strike price of $20 and a time to maturity of one year. The cost of each option is $2. The price of the underlying asset proves to be $25 in one year. What is the trader’s gain or loss? Show a dollar amount and indicate whether it is a gain or a loss. __________ 5. A trader sells 100 European put options (i.e., one contract) with a strike price of $50 and a time to maturity of six months. The price received for each option is $4. The price of the underlying asset is $41 in six months. What is the trader’s gain or loss? Show a dollar amount and indicate whether it is a gain or a loss. __________ 6. The price of a stock is $36 and the price of a three-month call option on the stock with a strike price of $36 is $3.60. Suppose a trader has $3,600 to invest and is trying to choose between buying 1,000 options and 100 shares of stock. How high does the stock price have to rise for an investment in options to lead to the same profit as an investment in the stock? _ _ _ _ _ _

7. A one-year call option on a stock with a strike price of $30 costs $3; a
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Bear Corporation and Transfer of Assets
    • 592 Words
    • 3 Pages

    Bear Corporation and Transfer of Assets

    Bob transferred equipment and receives a bear note of $ 10,000 (boot) that is due in three years and 300 shares of common stock. Bob will recognize a gain of the $ 10,000 note the lesser value of the gain of $15,000 from the transfer of equipment. However, the remaining gain of 5,000 (40,000 less 25,000 basis less 10,000 note) will be deferred to later years. The basis of equipment transferred in is $25,000 (25,000 plus 10,000 gain minus the receipt of note 10,000). (40,000 less 25,000 basis).…

    • 592 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Midterm Comm293
    • 5099 Words
    • 21 Pages

    Midterm Comm293

    Required: (a) Determine the amount of revenue and gross profit that Brigante would record in each of the four years using the Completed Contract method. (4 marks) (b) Determine the amount of revenue and gross profit that Brigante would record in each of the four years using the Percentage of Completion method. Please round to the nearest million. (10 marks) Part B Costless Ltd. is a nationwide wholesaler who sells directly to consumers through its warehouse stores. While customers generally pay cash at the time of sale for most purchases, Costless sells some of its more expensive items (e.g., televisions) on “layaway”. Under a layaway arrangement, an individual contractually agrees to make a down payment equal to 20% of the purchase price. The customer then pays the remaining 80% two months later.…

    • 5099 Words
    • 21 Pages
    Better Essays
    Read More
  • Good Essays

    Eco 372 Week 2 Research Paper
    • 687 Words
    • 3 Pages

    Eco 372 Week 2 Research Paper

    c. What would be the firm’s profit or loss at the following units of production sold: 12,000 units? 15,000 units? 20,000 units?…

    • 687 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Quiz 1 & 2
    • 6098 Words
    • 25 Pages

    Quiz 1 & 2

    3. Question : (TCO B) The Congress Company has identified two methods for producing playing cards. One method involves using a machine having a fixed cost of $10,000 and variable costs of $1.00 per deck of cards. The other method would use a less expensive machine (fixed cost = $5,000), but it would require greater variable costs ($1.50 per deck of cards). If the selling price per deck of cards will be the same under each method, at what level of output will the two methods produce the same net operating income (EBIT)?…

    • 6098 Words
    • 25 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Simpson Case ACL
    • 651 Words
    • 10 Pages

    Simpson Case ACL

    Question 6. Determine whether there are any transaction types other than the four included in the introduction to the case. List the exceptions, if any, and describe the likely cause of exception.…

    • 651 Words
    • 10 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    COMM 215 W14 SOS Final Mock Exam
    • 3936 Words
    • 24 Pages

    COMM 215 W14 SOS Final Mock Exam

    1. This is a simulated exam. The questions are based on our instructors review of…

    • 3936 Words
    • 24 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    OTC market
    • 1500 Words
    • 5 Pages

    OTC market

    (b) Before trading begins on Day 2 the company announces trial testing of a cure for acne in mice. The quoted bid and ask jump to 110 1/4-1/2. During Day 2 you receive market sell orders for 8,000 shares and buy orders for 2,000 shares. What is your total profit or loss over the two-day period? What is the value of your inventory at the end of Day 2?…

    • 1500 Words
    • 5 Pages
    Good Essays
    Read More
  • Good Essays

    Rock "N" Rap
    • 597 Words
    • 3 Pages

    Rock "N" Rap

    Explain how you found an answer to Question 3 and why you think your answer gives the maximum profit. I know this because this is the highest point in the feasible region. I it’s hard to tell exactly just by graphing so the problem must be solved algebraically. I…

    • 597 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Financial Accounting
    • 702 Words
    • 3 Pages

    Financial Accounting

    1. Welch Company purchased a put option on Reese common shares on January 7, 2010 for $215. The put option is for 300 shares, and the strike price is $51. The option expires on July 31, 2010. On March 31, 2010, the market value of Reese stock was $48 per share and the time value of the option was $120. The put option is not designated as a hedge. If the company has to prepare financial statements on March 31, 2010, what would the entry be? A debit to the Put Option and a…

    • 702 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Game Theory and Best Decision
    • 638 Words
    • 3 Pages

    Game Theory and Best Decision

    A family business is considering making an investment in its manufacturing operation. Three decisions are under consideration: (1) a large investment; (2) a medium investment; and (3) a small investment. The business believes that there are three possible future outcomes for its product: (1) increasing demand; (2) stable demand; and (3) decreasing demand. The following payoff table describes the decision situation.…

    • 638 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Mobile Phone
    • 215 Words
    • 1 Page

    Mobile Phone

    5. Suppose in the next month, the total profit on smart phone cases and tablet cases is $1,500. The profit amounts are the same, $2 for smart phone case and $3 for the tablet case. Compare and contrast the graphs. Explain how the graphs of the functions for the two months are the same and how they are different.…

    • 215 Words
    • 1 Page
    Satisfactory Essays
    Read More
  • Good Essays

    Sally Jameson Valuing Stock Options in a Compensation Package
    • 1045 Words
    • 3 Pages

    Sally Jameson Valuing Stock Options in a Compensation Package

    We know that the stock is currently trading at $18.75 and the exercise price is $35. We take the 5 year T-bill rate 6.02% as the risk free rate. From the Exhibit 2, we can calculate the volatility of Telstar stock return is around 27.65%. Plug them into the formula, the call option price will be 2.53. At this amount, Sally’s options would be presently worth 2.53 * 3000 = 7590. She is better off taking the option.…

    • 1045 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    finc853
    • 912 Words
    • 4 Pages

    finc853

    This week’s homework is divided into two parts. First, please answer the 2 questions below. Second, you will develop a trading strategy based on a concept known as “triangular arbitrage.” Below you will find links to four brief videos explaining the concept & how to test for its existence.…

    • 912 Words
    • 4 Pages
    Good Essays
    Read More
  • Good Essays

    Marginal Cost and Net Benefits
    • 8076 Words
    • 33 Pages

    Marginal Cost and Net Benefits

    ___________________________________________________________________________ 1. A Ch3 Student: firm will maximize profit by producing that level of output at which A. the additional revenue from the last unit sold exceeds the additional cost of the last unit by the largest amount. B. the additional revenue from the last unit sold equals the additional cost of the last unit. C. total revenue exceeds total cost by the largest amount. D. total revenue equals total cost. E. both b and c 2. The function a decision maker seeks to maximize or minimize is the ________ function. A. optimal B. decision-making C. objective D. marginal E. none of the above 3. Choice variables A. determine the value of the objective function B. determine the constraint C. can only take on integer values D. cannot be continuous E. both c and d 4. For an unconstrained maximization problem A. the decision maker seeks to maximize net benefits. B. the decision maker seeks to maximize total benefits. C. the decision maker does not take cost into account because there is no constraint. D. the decision maker does not take the objective function into account because there is no constraint. E. none of the above 5. When marginal cost is greater than marginal benefit at the current activity level, the decision maker can increase net benefit by decreasing the activity because A. B. C. D. total benefit will rise by more than total cost will rise. marginal cost is rising faster than marginal benefit is falling. net benefit is upward sloping at this point. total cost will fall by more than total benefit will fall. 6. For a constrained minimization problem, the decision maker A. is constrained by the specific amount of total benefits. B. is…

    • 8076 Words
    • 33 Pages
    Good Essays
    Read More

Related Topics