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Unformatted text preview: atio is the ________. T A) elta D B) ho R C) heta T D) ega V Answer: A 27) trader who monitors which Greek is most likely to pay close attention to the actions of the A Federal Reserve Board? A) elta D B) ho R C) heta T D) ega V Answer: B 28) hat is the only unobservable variable in the Black Scholes model? W A) xercise price E B) nterest rates I C) tock price S D) olatility V Answer: D 29) iven the following data, what is the approximate implied volatility? Assume S = $38.50, K G = $40, r = .06, Call price = $1.60 the stock pays no dividend and the option expires in 45 days. A) 1 % 2 B) 32 % C) 9 % 3 D) 4 % 4 Answer: B 30) iven the following data, what is the approximate implied volatility? Assume S = $41, K = G $40, r = .08, Call price = $2.70 the stock pays no dividend and the option expires in 90 days. A) 1 % 2 B) 2 % 3 C) 9 % 3 D) 4 % 4 Answer: A 11.2 Short Answer Essay Questions 1) hich Greek is also called time decay and why? W Answer: Theta is called time decay because it measures the change in the option price relative to a change in the time to expiration. 5 2) raw a payoff diagram for a long put position, depi...
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