18 - D - Imagine Steve Jobs of Apple decides to retire and...

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Sheet1 Page 1 A - What does a call option on a stock allow its owner to do at expiration of the contract? a. Buy the stock at a specified price. b. Sell the stock at a specified price. c. Buy the stock at the market price. d. Sell the stock at the market price. D - An IBM call option has an exercise price of $100 and cost $4. What would be the net payoff for the owner of this option at exp a. -$6 b. -$4 c. +$4 d. +$6 e. +$10 c - a. -$5 b. -$3 c. +$2 d. +$3 e. +$5 c - An investor who owns a stock can protect against the price of the stock falling by doing which of the following? a. Buying a call option on the stock. b. Selling (writing) a call option on the stock. c. Buying a put option on the stock. d. Selling (writing) a put option on the stock.
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Unformatted text preview: D - Imagine Steve Jobs of Apple decides to retire and he and Apple's board decides to sell Apple to Microsoft in exchange for sha a. Neither of Mr. Jobs' options will be exercised, and he can sell his stock for $23 per share. b. Only Mr. Jobs' put options will be exercised, and he will sell his stock for $18 per share. c. Only Mr. Jobs' call options will be exercised, and he will have to buy more stock for $22 per share. d. Only Mr. Jobs' call options will be exercised, and he will sell his stock for $22 per share. B - Your company needs to buy indigo ink in 3 months in order to manufacture ink pens and is worried about the price of ink rising a. They can sell indigo ink futures. b. They can buy indigo ink futures. c. They can sell (write) indigo ink call options. d. They can buy indigo ink put options....
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