ch15(6e) sample - ch15(6e) sample 1. If the Black-Scholes...

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ch15(6e) sample 1. If the Black-Scholes formula is solved to find the standard deviation consistent with the current market call premium, that standard deviation would be called the _______. A. variability B. volatility C. implied volatility D. deviance 2. If put-call parity is violated in the market, this may be _______. A. a profit opportunity B. due to "stale" prices C. too small a difference to exploit due to trading costs D. any of the above could be true 3. The hedge ratio is often called the option's _______. A. delta B. synthetic C. dynamic D. beta 4. The Black-Scholes formula seems to perform worst for stocks with _______ dividends. A. no B. low C. moderate D. high 5. Before expiration the time value of an out-of-the money stock option is __________. A. equal to the stock price minus the exercise price B. equal to zero C. negative D. positive
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___________________. A. the option is deep in the money B. the option is approximately at the money C. the option is far out of the money D. time to expiration is very low 7. The value of a call option increases with all of the following except ___________. A. stock price B. time to maturity C. volatility D. All of the above 8. A stock option has an intrinsic value of zero if the option is __________. A. in-the-money B. out-of-the money C. both a and b D. neither a nor b 9. __________ is a true statement. A. The actual value of a call option is greater than its intrinsic value prior to expiration B. The intrinsic value of a call option is always greater than its time value prior to expiration C. The intrinsic value of a call option is always positive prior to expiration D. The intrinsic value of a call option is greater than its actual value prior to expiration 10. Research suggests that option pricing models that allow for the possibility of ____________, provide more accurate pricing than does the Black-Scholes option pricing model. A. stock splits
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This note was uploaded on 08/06/2009 for the course BUSINESS 4444 taught by Professor Dr.dale during the Spring '09 term at University of Texas at Dallas, Richardson.

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ch15(6e) sample - ch15(6e) sample 1. If the Black-Scholes...

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