q5versionearly2 (1) - MGT 3062 FINANCIAL MANAGEMENT FALL...

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MGT 3062 FINANCIAL MANAGEMENT FALL 2009 QUIZ 5 Student: ___________________________________________________________________________ Choose the BEST answer to each question. Bubble in your answer on the form provided. If you feel the answer is not provided, show your work, explain your assumptions, and write your answer on the exam. Remove all hats and dark glasses. If you have to go to the restroom, go now. No electronic devices allowed. You may not use your cell phone as a calculator. As a courtesy to your classmates, no questions are allowed after the initial instructions are given. Ethics Challenge: I swear by everything I hold sacred and my family honor that: the work on this exam is my own without outside assistance, that I did not provide assistance to another classmate, that I used no electronic devices for information storage, retrieval, or communications, that I have abided by the Georgia Tech honor code in the preparation and execution of this exam. I understand that I will be prosecuted to the fullest extent of the law for violating the Georgia Tech honor code. Signature:____________________________________________________________________________ OPTIONS: These questions will be weighted such that they constitute 40% of this quiz grade. Answer the following questions using the 3M Co. options chain that is attached to the back of this quiz. Show your work and CIRCLE YOUR ANSWERS. No partial credit. (1 point each) 1. How much does a Jan 2010 $70.00 call cost on a per share basis? 2. How many shares do you control in a standard option contract? 3. If you buy a Jan 2010 $80.00 call today and the market (spot) price rises to $90 at expiration, what is your net profit per share?
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4. If you buy a Jan 2010 $80.00 put today and the market (spot) price rises to $90 at expiration, what is your net profit per share? 5. If you buy a Jan 2010 $70.00 put today and the market (spot) price falls to $60 at expiration, what is your net profit per share? 6. If you buy a Jan 2010 $70.00 call today and the market (spot) price falls to $60 at expiration, what is your net profit per share? 7. If you sell a Jan 2010 $80.00 call today and the market (spot) price rises to $85 at expiration, what is your net profit per share? 8. If you sell a Jan 2010 $80.00 put today and the market (spot) price rises to $85 at expiration, what is your net profit per share? 9. Circle the correct answer. The “holder” of an option contract {bought/sold] the option. The “writer” of the option contract {bought/sold} the option. THE NEXT FOUR QUESTIONS ARE DOUBLE WEIGHTED (2 points each) 10. When you buy a straddle (one call and one put), you are betting on market volatility. At expiration, what is the minimum and maximum spot price at which you breakeven for a $75.00 straddle? 11. You want to lock in your trading profits, so you create a collar around the current spot price.
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This note was uploaded on 02/09/2012 for the course MGT 3078 taught by Professor Marchman during the Spring '12 term at Georgia Institute of Technology.

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q5versionearly2 (1) - MGT 3062 FINANCIAL MANAGEMENT FALL...

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