MA 373 F11 Quiz 6 Solutions

MA 373 F11 Quiz 6 Solutions - Math 373 Quiz 6 November 29,...

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Unformatted text preview: Math 373 Quiz 6 November 29, 2011 1. Circle each of the following that are true. For each statement that is false, change the sentence to make it true. If the spot price at expiration on a put contact is less than the exercise price, then the w a. fir” . payoff IS zero. f . alwgrextfmlale l/b. A earthquake IS a Wfiable risk. {5: Your automobile insurance policy is a derivative. Fd. The maximum profit on the sale of a put option is th Slam r r vav? i fiwmvg Val“ mg p/KMJEM. Li)”lfi..§ 4% (£962!th mafia, “lgéafi M $ “g r4262, mgr?” *‘ ea; “la lemme 2. Jon purchased a stock at the current spot price of S0. One year later, Jon sold the stock for 300 for a profit of 50. The annual effective risk free interest rate is 8%. Determine S0. 3. Elley enters into a short one year forward contract on the stock of Ma Company. The current stock price of the Ma Company is 120 and the forward price is 124.80. Complete the following table. Show your work. Spot Price at ’ . . Payoff l Future Value of Cost t Profit l Expiration 4. There are three exercise styles for options - American style, Bermuda style, and European style. Define each one. Amwmmm (9m figgrfligrfi to my S gal; iD f Liar {a «9‘ There are three exercise styles for options — American style, Bermuda style, and European style. Define each one. [Limericwe— (94A. be gxgmisé’J Earlier ‘lo {arc/flawv 5M; 5/ mg m m, 2. Elley enters into a short one year forward contract on the stock of Ma Company. The current stock price ofthe Ma Company is 100 and the forward price is 105. Complete the following table. Show your work. SpOtPrlse at Payoff Future Value of Cost Expiration 3. Circle each of the following that are true. For each statement that is false, change the sentence to make it true. If the spot price at expiration on a put contact is greater than the exercise price, then i a. “M33 F the profit is zero. "7% b. Your automobile insurance policy is a derivative. a Neraa‘iiakl e; p c. A hurricane is a Wmifiabfe risk. or: d. The maximum profit on the sale of a call option is the WW Fwflr’e W5er £14 em, 4. Jon purchased a stock at the current spot price of SO. One year later, Jon sold the stock for 200 for a profit of 50. The annual effective risk free interest rate is 8%. Determine SO. ...
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This note was uploaded on 02/26/2012 for the course MA 373 taught by Professor Staff during the Fall '08 term at Purdue University.

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MA 373 F11 Quiz 6 Solutions - Math 373 Quiz 6 November 29,...

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