MCQs Lecture 1 - RISK M7 Hull J Options Futures and other Derivatives Pearson 8th Ed 2012 MCQs on Lecture 1 1 A one-year call option on a stock with a

MCQs Lecture 1 - RISK M7 Hull J Options Futures and other...

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1 RISK MANAGEMENT 07 02697 Hull, J. Options , Futures and other Derivatives’ Pearson, 8 th Ed, 2012. MCQs on Lecture 1 1.A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven stock price above which the trader makes a profit is A.$35 B.$40 C.$30 D.$36 E.None of the above 2.A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven stock price below which the trader makes a profit is 3.Which of the following describes European options? 4.Which of the following is NOT true 5.Which of the following is NOT true about call and put options: A.An American option can be exercised at any time during its life B.A European option can only be exercised only on the maturity date C.Investors must pay an upfront price (the option premium) for an option contract D.The price of a call option increases as the strike price increases E.None of the above
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2 6.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 option price is $2. The options are exercised when the stock price is $65. The trader’s net profit is 7.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 when the option price is $5. The options are exercised when the stock price is $110. The trader’s net profit or loss is
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