financial assets are costly
financial assets have higher probability of positive payoff
real assets are implicit, rather than explicit
real assets are not influenced by price volatility.
2. Investors who hold warrants essentially have a:
put option on the firm's bonds.
put option on the firm's equity.
call option on the firm's bonds.
call option on the firm's equity.
3. The payoff's from investing in options are designed so that:
both buyers and sellers can profit
the seller's(buyers) gain is the buyers(sellers) loss.
roughly 20% of sellers and 50% of buyers profit
few buyers or sellers profit; they buy "insurance"
4. You are currently holding a call option on a stock with a exercise price of $80. if the current stock price is $60, your net proceeds by exercising this option will be:
5. Which of the following call options would command the higher premium, other things equal?
October 1996 expiration, $45 strike price
December 1996 expiration, $40 strike price
March 1997 expiration, $45 strike price
June 1997 expiration, $ 40 strike price
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