Take Test: Online Quiz 10

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FINS2624-Portfolio Mgmt - s1/2013

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Online quizzes

Online quiz 10

Take Test: Online Quiz 10

Take Test: Online Quiz 10

Description
Instructions
Multiple Attempts This Test allows 3 attempts. This is attempt number 1.
Force Completion This Test can be saved and resumed later.

Test/Surv ey Status

Question 1

10 points

The maximum loss for a writer of a naked stock call option is

the exercise price minus the stock price.
unlimited.
larger the lower the stock price.
the call premium.
the larger of zero and the difference between the stock price and the exercise price.

Question 2

10 points

The shares of CBA are currently priced at $50 each. If a call option on CBA has an exercise price of $45, the
call
is out of the money.
is in the money.
sells for a higher price than if the stock is priced at $40.
A and C.
B and C.

Question 3

10 points

A covered call position is

the simultaneous purchase of the call and the underlying asset.
the purchase of a share of stock with a simultaneous sale of a put on that stock.
the short sale of a share of stock with a simultaneous sale of a call on that stock.
the purchase of a share of stock with a simultaneous sale of a call on that stock.
the simultaneous purchase of a call and sale of a put on the same stock.

Question 4

10 points

Consider a one-year maturity call option and a one-year put option on the same

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stock, both with striking price $100. If the risk-free rate is 5%, the stock price is $103,
and the put sells for $7.50, what should be the price of the call?
$17.50
$15.26
$10.36
$12.26
none of the above

Question 5

10 points

Buyers of put options would prefer a ____ in the value of the underlying asset and sellers of call options would
Test/Surv
prefer a ____ in the value of the underlying
asset.ey Status
increase; increase
decrease; increase
increase; decrease
decrease; decrease
cannot tell without further information

Question 6

10 points

The intrinsic value of an in-the-money put option is equal to

the stock price minus the exercise price.
the put premium.
zero.
the exercise price minus the stock price.
none of the above.

Question 7

10 points

Suppose you purchase one RIO Dec 100 call contract at $5 and write one RIO Dec 105 call contract at $2.
The option contract size is 1000 shares per contract. The maximum potential profit of your strategy is
$6000
$5000
$2000
$3000
$1000

Question 8

10 points

The intrinsic value of an out-of-the-money call option is equal to

the call premium.
zero.
the stock price minus the exercise price.
the striking price.
none of the above.

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Question 9

10 points

You purchase one September 50 put contract for a put premium of $2. What is the maximum profit that you
could gain from this strategy? The option contract size is 1000 shares per contract.
$48,000
$2000
$50,000
$52,000
none of the above

Question 10

10 points
Test/Surv ey Status

A call option on a stock is said to be out of the money if

the exercise price is higher than the stock price.
the exercise price is less than the stock price.
the exercise price is equal to the stock price.
the price of the put is higher than the price of the call.
the price of the call is higher than the price of the put.

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