chap014 - Chapter 014 Options and Corporate Finance...

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Chapter 014 Options and Corporate Finance Multiple Choice Questions 1. A contract that grants its owner the right to buy or sell a specified asset at an agreed-upon price on or before a given date is called a(n): A . option. b. invoice. c. exercise. d. swap. e. straddle. SECTION: 14.1 TOPIC: OPTION TYPE: DEFINITIONS 2. Exercising an option is the act of: a. buying the right to either buy or sell an asset at a specified price for a stated period of time. b. purposely allowing an option to expire. C . buying or selling the underlying asset via the option contract. d. purchasing a second option to exactly offset an option which you currently own. e. purchasing shares of stock in the open market to offset an option position. SECTION: 14.1 TOPIC: EXERCISING THE OPTION TYPE: DEFINITIONS 3. The fixed price in an option contract at which the holder can buy or sell the underlying asset is called the option's: a. opening price. b. intrinsic value. C . strike price. d. market price. e. time value. SECTION: 14.1 TOPIC: STRIKE PRICE TYPE: DEFINITIONS 14-1
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Chapter 014 Options and Corporate Finance 4. The last day on which an option can be exercised is the _____ date. a. ex-payment b. ex-option c. opening D . expiration e. intrinsic SECTION: 14.1 TOPIC: EXPIRATION DATE TYPE: DEFINITIONS 5. An option that may be exercised at any time before it expires is called a(n) _____ option. a. flexible b. portable c. daily d. European E . American SECTION: 14.1 TOPIC: AMERICAN OPTIONS TYPE: DEFINITIONS 6. An option that may be exercised only on the expiration date is called a(n) _____ option. A . European b. American c. inflexible d. dated e. pointed SECTION: 14.1 TOPIC: EUROPEAN OPTIONS TYPE: DEFINITIONS 14-2
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Chapter 014 Options and Corporate Finance 7. A call option is the _____ an asset at a fixed price during a stated period of time. a. right to sell B . right to buy c. obligation to sell d. obligation to buy e. obligation to trade SECTION: 14.1 TOPIC: CALL OPTION TYPE: DEFINITIONS 8. A put option is the _____ an asset at a fixed price during a stated period of time. A . right to sell b. right to buy c. obligation to sell d. obligation to buy e. obligation to trade SECTION: 14.1 TOPIC: PUT OPTION TYPE: DEFINITIONS 9. The value of an option if it were about to expire is called the _____ value. a. strike b. upper c. deadline d. time E . intrinsic SECTION: 14.2 TOPIC: INTRINSIC VALUE TYPE: DEFINITIONS 14-3
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Chapter 014 Options and Corporate Finance 10. The right granted to a company employee which enables that employee to buy shares of stock in the company at a set price for a fixed period of time is called a(n): A . employee stock option. b. company bonus option. c. employee grant. d. employee exercise option. e. company benefits option. SECTION: 14.6 TOPIC: EMPLOYEE STOCK OPTION TYPE: DEFINITIONS 11. An option based on an underlying asset such as a building or land is called a _____ option. a. financial b. liquid c. fixed D . real e. tangible SECTION: 14.4 TOPIC: REAL OPTION TYPE: DEFINITIONS 12. The investment timing decision is the: a. determination of when an option should be exercised. b. decision of when to purchase an option on an underlying asset.
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This note was uploaded on 03/23/2011 for the course ECON 202098 taught by Professor Sameer during the Spring '11 term at University of Jordan.

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chap014 - Chapter 014 Options and Corporate Finance...

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