CH19+questions - Chapter 19 Options 1 Describe the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 19 Options 1. Describe the characteristics of a call option and a put option, and define the premium and the strike, or exercise price, from the perspective of both the buyer and the writer of these contracts. 2. A company has a debt facility that will need to be refinanced in three months’ time. It is concerned that interest rates may change in that time, but is uncertain whether they will rise or fall. The company is considering using an options contract to manage the risk exposure. What are the advantages and disadvantages of using an options contract strategy to manage an interest rate risk exposure? In your answer, consider the nature of an options contract within the context of exchange-traded options contracts and over-the-counter options contracts. 3. An investor enters into a long call option on Santos Limited shares with an exercise price of $7.25 per share in two months, and pays a premium of $0.70 per share. (a) Calculate the break-even price for the short-call position.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 2

CH19+questions - Chapter 19 Options 1 Describe the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online