homework03 - EF4320: Homework03 Homework 3, Chapters 20...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
EF4320: Homework03 1 Homework 3, Chapters 20 & 21 1. The intrinsic value of an in-the-money put option is equal to A. the stock price minus the exercise price. B. the put premium. C. zero. D. the exercise price minus the stock price. E. none of the above. 2. You purchase one IBM 70 call option for a premium of $6. Ignoring transaction costs, the break-even price of the position is A. $98 B. $64 C. $76 D. $70 E. none of the above 3. A covered call position is A. the simultaneous purchase of the call and the underlying asset. B. the purchase of a share of stock with a simultaneous sale of a put on that stock. C. the short sale of a share of stock with a simultaneous sale of a call on that stock. D. the purchase of a share of stock with a simultaneous sale of a call on that stock. E. the simultaneous purchase of a call and sale of a put on the same stock. 4. According to the put-call parity theorem, the value of a European put option on a non-dividend paying stock is equal to: A. the call value plus the present value of the exercise price plus the stock price. B. the call value plus the present value of the exercise price minus the stock price.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
EF4320: Homework03 2 C. the present value of the stock price minus the exercise price minus the call price. D. the present value of the stock price plus the exercise price minus the call price. E. none of the above. 5. A protective put strategy is A. a long put plus a long position in the underlying asset. B. a long put plus a long call on the same underlying asset. C. a long call plus a short put on the same underlying asset. D. a long put plus a short call on the same underlying asset. E. none of the above. 6. You purchased one AT&T March 50 call and sold one AT&T March 55 call. Your strategy is known as A. a long straddle. B. a horizontal spread. C. a vertical spread. D. a short straddle. E. none of the above. 7.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/03/2009 for the course FINANCE EF4320 taught by Professor Wuxueping during the Spring '09 term at City University of Hong Kong.

Page1 / 8

homework03 - EF4320: Homework03 Homework 3, Chapters 20...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online