sample3 - FI 312 Practice test 3 1. You purchase one IBM...

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FI 312 Practice test 3 1. You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment. A.$200 profit B.$200 loss C.$300 profit D.$300 loss 2. You buy a call option on Merritt Corp. with an exercise price of $50 and an expiration date in July and write a call option on Merritt Corp. with an exercise price of $55 with an expiration date in July. This is called a _________. A.horizontal spread B.long straddle C.short straddle D.vertical spread 3. You purchase one IBM March 120 put contract for a put premium of $10. The maximum profit that you could gain from this strategy is __________. A.$120 B.$1,000 C.$11,000 D.$12,000 4. Which strategy benefits from upside price movement and has protection should the price of the security fall? A.Bull spread B.Long put C.Short call D.Straddle 1
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5. A one dollar increase in a call option's exercise price would result in __________ in the call option's value of __________ than one dollar. A.a decrease, less B.a decrease, more C.an increase, less D.an increase, more 6. You are considering purchasing a put option on a stock with a current price of $39. The exercise price is
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sample3 - FI 312 Practice test 3 1. You purchase one IBM...

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