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Unformatted text preview: Saint Joseph’s University
Haub School of Business, Department f Finance
Derivatives: FIN 612, Spring 2 12
Quiz Chapter 3 NAME (Please Print Clearly) Score A strategy consists of buying a market index product at $830 and buying a p on the index with a strike of $830. If
the put premium is $18.00 and interest rates are 0.5% per month, what is the roﬁt or loss at expiration (in 6
months) if the market index is $810? (a) $20.00 gain
(b) $18.65 gain
(0) $36.29 loss
(cl) $43.76 loss Answer: D A strategy consists of buying SJU stock at $80 and buying an SJU call with
a strike of $80. If the call premium is $3.23, compute the total proﬁt or loss om the SJU Stock and Call at
expiration if SJU stock closes at 76.77 on expiration? (a) $6.46 gain
(b) $3.23 loss
(0) $6.46 loss
(d) $0 Answer: C The owner of a Short Call and Long Put has the equivalent risk position as an investor with (a) Short Underlying Position
(b) Long Call (0) Long Underlying Position
((1) Short Call Answer: A A strategy consists of buying a market index product at $830 and longing a p t on the index with
a strike of $830. If the put premium is $18 .00 and interest rates are 0.5% per onth, what is the estimated price of a call option with an exercise price of $830?
(a) $42.47
(b) $45.26
(c) $47.67
(cl) $49.55 Answer: A
A strategy consists of longing a put on the market index with a strike of 830 d shorting a call option on the market index with a strike price of 830. The put premium is $18.00 and the call prem um is $44.00. Interest rates are 0.5%
per month. Determine the net proﬁt or loss if the index price at expiration is $ 30 (in 6 months). (a) $0 (b) $23.67 loss (0) $26.79 gain (d) $28.50 gain Answer: C A strategy consists of longing a put on the market index with a strike of 830 d shorting a call option on the market
index with a strike price of 830. The put premium is $18.00 and the call prem um is $44.00. Interest rates are 0.5%
per month. What is the breakeven price of the market index for this strategy a expiration (in 6 months)? (a) $802.12 (b) $83 0.00 (c) $855.21 (d) $866.32 Answer: C 10. At the 6 month point, what is the breakeven index price for a strategy of long ng the market index at a price of 830?
Interest rates are 0.5% per month. (a) $802.12 (b) $830.00 (c) $855.21 (d) $866.32 Answer: C What is the maximum loss that an investor can have from a 6 month strategy mploying a short 90 strike put and a
long 80 strike put in the same expiration month? The spread price is $3.45. (a) $6.55
(b) $3.45
(c) $0 ((1) $10.00 Answer: D What is the maximum proﬁt that an investor can obtain from a 6 month strate employing a long 820 call and a short 850 call in the same expiration month? The cost of the spread is $11.22. (a) $30.00
(b) $41.22
(c) $11.22
((1) $18.78 Answer: D An investor purchases a call option with an exercise price of $55 for $2.60. T e same investor sells a call on the
same security with an exercise price of $60 for $1.40. At expiration, 3 month later. the stock price is $56.75. All
other things being equal and given an annual interest rate of 4.0%, what is the net proﬁt or loss to the investor?
(a) $1.21 loss (1)) $1.50 loss (c) $0.54 gain ((1) $1.65 gain Answer: C ...
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 Spring '12
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