CH24AQZV7 - Chapter 24 Quiz A Student Name _ _ 1. Student...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 24 Quiz A Student Name _________________________ Student ID ____________ ________ 1. A protective put strategy can be exactly duplicated by: a. investing in a risky asset and taking out a riskless loan. b. holding a risky asset and purchasing a call option. c. investing in a riskless asset and purchasing a call option. d. taking out a riskless loan and purchasing a call option. ________ 2. Which one of the following statements is correct? a. A European-style put is worth more than an American-style put. b. The sensitivity of an option’s value to the passage of time is called its theta. c. The value of an option is equal to the option’s intrinsic value minus the time premium. d. Increasing the risk-free rate has a negative impact on call values. ________ 3. Paying off debt is similar to _____ option on the assets of a firm. a. exercising an in-the-money put b. selling a put c. selling a call d. exercising an in-the-money call ________ 4. The value of a risky bond is equal to the value of a risk-free bond _____ option. a. minus a put b. plus a put c. minus a call d. plus a call ________ 5. Pure financial mergers are: I. good for creditors. II. good for stockholders. III. bad for creditors. IV. bad for stockholders. a. I and II only b. I and IV only c. II and III only d. III and IV only ________ 6. A share of stock is selling for $40 a share. A three-month call option with a $45 strike price sells for $1. The risk-free rate is .5 percent per month. What is the price of a three-month put option with a $45 strike price? a. $3.33 b. $5.33 c. $6.00 d. $6.68 ________ 7. You recently purchased one share of ABC stock at a price of $43. You also purchased a one-year put option on ABC with a $40 strike price. The cost of the put was $.50. What is the maximum amount you can lose during the one-year option period? a. -$3.50 b. -$3.00 c. -$2.50 d. -$2.00 ________ 8. Today, you purchased a one-year risk-free asset which pays 4% interest at a cost of $38.46. You also purchased a one-year call option on XYZ stock with a strike price of $40 and a cost of $2.20. How much profit will you earn if the stock is worth $55 one year from now? a. -$15.66
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

CH24AQZV7 - Chapter 24 Quiz A Student Name _ _ 1. Student...

This preview shows document pages 1 - 2. Sign up to view the full document.

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