Correct Answer If the underlying stock does not pay a dividend it does not make

Correct answer if the underlying stock does not pay a

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Correct Answer:If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.Question 9 4 out of 4 pointsWhich of the following statements is CORRECT?Answer Selected Answer:Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be.Correct Answer:Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be.Question 10 4 out of 4 pointsWhich of the following statements is CORRECT?Answer Selected Answer:The market value of an option depends in part on the option's time to
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maturity and also on the variability of the underlying stock's price.Correct Answer:The market value of an option depends in part on the option's time to maturity and also on the variability of the underlying stock's price.Question 11 4 out of 4 pointsSuppose you believe that Florio Company's stock price is going to decline from its current level of $82.50 sometime during the next 5 months. For $5.10 you could buy a 5-month put option giving you the right to sell 1 share at a price of $85 per share. If you bought this option for $5.10 and Florio's stock price actually dropped to $60, what would your pre-tax net profit be?Answer Selected Answer:$19.90Correct Answer:$19.90Question 12 4 out of 4 pointsWhich of the following statements is CORRECT?Answer Selected Answer:If the underlying stock does not pay a dividend, it does not make good
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economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.Correct Answer:If the underlying stock does not pay a dividend, it does not make good economic sense to exercise a call option prior to its expiration date, even if this would yield an immediate profit.Question 13 4 out of 4 pointsWhich of the following statements is CORRECT?Answer Selected Answer:An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend.Correct Answer:An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend.Question 14 4 out of 4 pointsSuppose you believe that Basso Inc.'s stock price is going to increase from its current level of $22.50 sometime during the next 5 months. For $3.10 you can buy a 5-month call option giving you the right to buy 1 share at a price of $25 per share. If you buy this option for $3.10 and Basso's stock price actually rises to $45, what would your pre-tax net profit be?
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  • Spring '08
  • NALLA
  • Options, Strike price

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