30.In the Black-Scholes model, as the stock's price increases, the values of N(d1) and N(d2) will _______ for a call and _______ for a put option. A.increase; decreaseB. increase; increaseC. decrease; increaseD. decrease; decreaseAACSB: AnalyticBlooms: RememberBodie - Chapter 16 #35Difficulty: 2 MediumLearning Objective: 16-03 Compute the Black-Scholes value and implied volatility of an option.Topic: Black-Scholes Option Valuation31.Research suggests that option-pricing models that allow for the possibility of ___________ provide more accurate pricing than does the basic Black-Scholes option-pricing model.I. early exerciseII. changing expected returns of the stockIII. time varying stock price volatility AACSB: AnalyticBlooms: RememberBodie - Chapter 16 #36Difficulty: 2 MediumLearning Objective: 16-03 Compute the Black-Scholes value and implied volatility of an option.Topic: Black-Scholes Option Valuation32.The practice of using options or dynamic hedging strategies to provide protection against investment losses while maintaining upside potential is called _________. 11

AACSB: AnalyticBlooms: RememberBodie - Chapter 16 #40Difficulty: 1 EasyLearning Objective: 16-05 Compute the hedge ratio of an option; and use that ratio to manage risk.Topic: Hedge Ratios and the Black-Scholes Formula33.The price of a stock put option is __________ correlated with the stock price and __________ correlated with the exercise price. AACSB: AnalyticBlooms: RememberBodie - Chapter 16 #42Difficulty: 2 MediumLearning Objective: 16-01 Identify the features of an option that affect its market value.Topic: Option Valuation: Introduction34.A higher-dividend payout policy will have a __________ impact on the value of a put and a __________ impact on the value of a call. A. negative; negativeB. negative; positiveC.positive; negativeD. positive; positiveAACSB: AnalyticBlooms: RememberBodie - Chapter 16 #45Difficulty: 2 MediumLearning Objective: 16-01 Identify the features of an option that affect its market value.Topic: Option Valuation: Introduction35.A hedge ratio of .70 implies that a hedged portfolio should consist of ________. AACSB: AnalyticBlooms: RememberBodie - Chapter 16 #47Difficulty: 2 MediumLearning Objective: 16-02 Compute an option value in two-scenario and binomial models of the economy.Topic: Binomial Option Pricing12