Exam of Beloy (3rd)

Question 1

A contract giving the owner the right to buy or sell an asset at a fixed price for a given period of time is

Answer 1

AN OPTION

Question 2

A European call option can be exercised

Answer 2

ONLY ON THE EXPIRATION DATE

Question 3

A European put option allows the holder to

Answer 3

SELL THE UNDERLYING ASSET AT THE STRIKING PRICE ON THE EXPIRATION DATE

Question 4

Lookback options have payoffs that

Answer 4

DEPEND IN THE PART ON THE MINIMUM OR MAIMUM PROCE OF THE UNDERLYING ASSET

Question 5

A derivative is a financial instrument whose value is determined by

Answer 5

AN UNDERLYING SECURITY

Question 6

Which contract is an option?

Answer 6

BOTH CALL AND PUT

Question 7

Derivatives are used by corporations as a useful tool for managing certain aspects of the firm’s risk.

Answer 7

TRUE

Question 8

The owner of a put option has

Answer 8

THE RIGHT BUT NOT THE ONLIGATIONTO SELLANASSET AT A GIVEN PRICE

Question 9

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

Answer 9

THE EXERCISE PRICE IS HIGHER THAN THE STOCK PRICE

Question 10

Ms. Co currently own a put option on Stock A with a strike price of P45. If the current price of Stock A is P40, then what is the in-the-money amount of the option?

Answer 10

-5

Question 11

To the option holder, put options are worth ______ when the exercise price is higher; call options are worth ______ when the exercise price is higher.

Answer 11

MORE;LESS

Question 12

The value of a stock put option is positively related to the following factors except

Answer 12

THE STOCK PRICE

Question 13

The price that the buyer of a call option pays for the underlying asset if she executes her option is called the

Answer 13

STRIKE OR EXERCISE PRICE

Question 14

A covered call position is

Answer 14

THE PURCHASE OF A SHARE OF A SROCK WITH A SIMULTANEOUS SALE OF A CALL OON THE STOCK

Question 15

Options, forwards, swaps, and futures are financial assets.

Answer 15

FALSE

Question 16

The owner of a call option has

Answer 16

THE RIGHT BUTNOT THE OBLIGATION TO BUY AN ASSET

Question 17

A seller of a put option on a futures contract obligates them to buy a futures contract should the put buyer exercise the option.

Answer 17

TRUE

Question 18

Buyers of call options __________ required to post margin deposits, and sellers of put options __________required to post margin deposits.

Answer 18

ARE ;ARE

Question 19

Futures contracts are slower to absorb new information than forward contracts.

Answer 19

FALSE

Question 20

Forward contracts are traded through an organized and regulated exchange rather than being negotiated directly between two parties.

Answer 20

TRUE

Question 21

An American put option can be exercised

Answer 21

ANYTIME ON OR BEORE THE EXPIRATION DATE

Question 22

Buyers of put options anticipate the value of the underlying asset will _______, and sellers of call options anticipate the value of the underlying asset will _____.

Answer 22

DECREASE; DECREASE

Question 23

An American put option allows the holder to

Answer 23

SELL THE UNDERLYING ASSET AT THE STRIKING PRICE ON OR BEFORE THE EX.

Question 24

A put option on a stock is said to be in the money if

Answer 24

THE EXERCISE PRICE IS HIGHER THAN THE STOCK PRICE

Question 25

Under the put option, as the price of the stock decreases, the value of the put option increases.

Answer 25

TRUE

Question 26

The strike price is the price at which the holder of a call option can buy a specified amount of stock at the option’s expiration date.

Answer 26

TRUE

Question 27

A contract between two parties to buy or sell an asset at a certain time in future for certain price is known as

Answer 27

FORWARD CONTRACT

Question 28

Put option gives the holder the right to buy the underlying asset at a certain price (exercise price or strike price) within a specific period of time.

Answer 28

FALSE

Question 29

A contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price is known as:

Answer 29

FUTURE CONTRACT

Question 30

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

Answer 30

the exercise price is less than the stock price.

Question 31

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

Answer 31

THE EXERCISE PRICE IS LESS THAN THE STOCK PRICE

Question 32

The current market price of a share of a stock is Php80. If a put option on this stock has a strike price of Php75, the put

Answer 32

IS OUT OF THE MONEY

Question 33

A call option on a stock is said to be at the money if THE EXERCISE PRICE IS LESS THAN THE STICK PRICE

Answer 33

the exercise price is equal to the stock price.

Question 34

Put options gives the holder the right to buy an asset at a certain price within a specific period of time.

Answer 34

FALSE

Question 35

A put option on a stock is said to be at the money if

Answer 35

THE EXERCISE PRICE IS EQUAL TO THE STOCK PRICE

Question 36

The current market price of a share of JNJ stock is Php60. If a put option on this stock has a strike price of Php55, the put

Answer 36

IS OUT OF THE MONEY AND SELS FOR A LOWER PROCE THA IF THE MARKET PRICE IS 50

Question 37

The option buyer who expects a stock price to decline will purchase a put option.

Answer 37

TRUE

Question 38

Options contracts contrast with futures contracts because

Answer 38

DEPEND IN PART ON THE MINIMUM OR MAXIMUM PRICE OF THE UNDERLYING ASSET DURING THE LIFE OF THE OPTION

Question 39

An American call option can be exercised

Answer 39

ANYTIME ON OR BEFORE THE EXPIRATION DATE

Question 40

The current market price of a share of a stock is Php20. If a put option on this stock has a strike price of Php18, the put

Answer 40

IS OUT OF THE MONEY