Investment Questions

Investment Questions - Lifetim e Open bu; cents per bu....

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Investment Quiz 1. What is the return on invested capital to an investor who purchased a futures contract at a price of 297 and sells the contract for 308? The contract is on 5,000 units, requires a 3% margin deposit and is priced in cents per unit. (Points : 10) a) 116.5% b) 127.4% c) 123.5% d) 119.0% 2. For all practical purposes, listed stock options always expire (Points : 10) a) on the first Monday of every calendar quarter. b) three months from the date of the option purchase. c) on the third Friday of the expiration month. d) on the last business day of the expiration month. 3. Matt owns 500 shares of IKM stock. The market price of IKM is $51.74. Matt just sold five calls on IKM with a strike price of $50. This is known as (Points : 10) a) writing a naked call. b) writing a covered call. c) covering a short position. d) creating a naked cover. 4. The December 11, 2003 edition of the Wall Street Journal listed the following information on oat futures. Oats (CBT)- 5,000
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Unformatted text preview: Lifetim e Open bu; cents per bu. Open High Low Settle Chg High Low Int Mar 04 149.00 151.50 148.75 149.75 1.00 157.75 131.00 4,464 May 150.00 151.25 149.50 150.25 0.50 158.50 135.00 350 Based on this information, which one of the following statements is correct? (Points : 10) a) Oats trade on the New York Mercantile Exchange. b) The price of the March 2004 oats contract at the close was $5,000 higher than the previous day's closing price. c) The cost of a March 2004 contract was $7,487.50 at the market close. d) The highest price at which the May oats contract has traded is $158.50 per contract. 5. One reason that writing options can be a viable and profitable investment strategy is that (Points : 10) a) the option writer collects the quarterly dividends. b) an option writer can exercise the option to avoid a potential loss. c) an option writer determines when the option is exercised. d) most options expire unexercised....
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