Life An Call Option Will Always Be Exercised At Maturity If The Underlying Asset Price Is Greater Than The Strike Price A Put Option Will Always Be

Life An Call Option Will Always Be Exercised At Maturity If The Underlying Asset Price Is Greater Than The Strike Price A Put Option Will Always Be Exercised At Maturity If The Strike Price Is Greater Than The Underlying Asset Price.When The Spot Price Is $58. The Spot Price In One Year Proves To Be $63. What Is The Trader’s Gain Or Loss? Show A Dollar Amount And Indicate Whether It Is A Gain Or A Loss. 3.A One-Year Call Option On A Stock With A Strike Price Of $30 Costs $3; A One-Year Put Option On The Stock With A Strike Price Of $30 Costs $4. Suppose That A Trader Buys Two Call Options And One Put Option. P_ _ _ _ _ _ 5.In The Corn Futures Contract A Number Of Different Types Of Corn Can Be Delivered (With Price Adjustments Specified By The Exchange) And There Are A Number Of Different Delivery Locations. Which Of The Following Is True (Circle One) This Flexibility Tends Increase The Futures Price. This Flexibility Tends Decrease The Futures Price. This Flexibility May Increase And May Decrease The Futures Price. This Has No Effect On The Futures PriceA Hedger Takes A Long Position In An Oil Futures Contract On November 1, 2009 To Hedge An Exposure On March 1, 2010. The Initial Futures Price Is $60. On December 31, 1999 The Futures Price Is $61. On March 1, 2010 It Is $64. The Contract Is Closed Out On March 1, 2010. What Gain Is Recognized In The Accounting Year January 1 To December 31, 2010? Each Contract Is On 1000 Barrels Of Oil. _ _ _ _ _ _ An Investor Shorts 100 Shares When The Share Price Is $50 And Closes Out The Position Six Months Later When The Share Price Is $43. The Shares Pay A Dividend Of $3 Per Share During The Six Months. How Much Does The Investor Gain? _ _ _ _ _ _An Exchange Rate Is 0.7000 And The Six-Month Domestic And Foreign Risk-Free Interest Rates Are 5% And 7% (Both Expressed With Continuous Compounding). What Is The Six-Month Forward Rate? Give Four Decimal Places _ _ _ _ _ _The Spot Price Of An Asset Is Positively Correlated With The Market. Which Of The Following Would You Expect To Be True (Circle One) The Forward Price Equals The Expected Future Spot Price. The Forward Price Is Greater Than The Expected Future Spot Price. The Forward Price Is Less Than The Expected Future Spot Price. The Forward Price Is Sometimes Greater And Sometimes Less Than The Expected Future Spot Price.Is It Ever Optimal To Exercise Early An American Call Option On A) The Spot Price Of Gold, B) The Spot Price Of Copper, C) The Futures Price Of Gold, And D) The Average Price Of Gold Measured Between Time Zero And The Current Time? Explain Your Answers.10.A Call And A Put On A Stock Have The Same Strike Price And Time To Maturity. At 10:00am On A Certain Day, The Price Of The Call Is $3 And The Price Of The Put Is $4. At 10:01am News Reaches The Market That Has No Effect On The Stock Price Or Interest Rates, But Increases Volatilities. As A Result The Price Of The Call Changes To $4.50. What Would You Expect The Price Of The Put To Change To? _ _ _ _ _ _ 11.Six-Month Call Options With Strike Prices Of $35 And $40 Cost $6 And $4, Respectively.What Is The Maximum Gain When A Bull Spread Is Created From The Calls?_ _ _ _ _ _What Is The Maximum Loss When A Bull Spread Is Created From The Calls?_ _ _ _ _ _ _ _ _ _ _ _ 13.A Three-Month Call With A Strike Price Of $25 Costs $2. A Three-Month Put With A Strike Price Of $20 And Costs $3. A Trader Uses The Options To Create A Strangle. For What Two Values Of The Stock Price In Three Months Does The Trader Breakeven With A Profit Of Zero? 14.Which Two Statements Are True (Circle Two)Delta Is A Measure Of The Volatility Of An OptionDelta Is A Measure Of The Position In The Underlying Stock That Should Be Taken To Hedge An OptionDelta Is Estimated By Considering Two Adjacent Nodes On A Tree At A Certain Time And Calculating The Difference In Option Prices Divided By The Difference In The Stock PricesThe Delta Of A Put Option Is Positive 15.The Black-Scholes-Merton Model Assumes (Circle One)The Return From The Stock In A Short Period Of Time Is LognormalThe Stock Price At A Future Time Is LognormalThe Stock Price At A Future Time Is NormalNone Of The Above16.Volatility Can Be Defined As (Circle One)The Standard Deviation Of The Return, Measured With Continuous Compounding, In One YearThe Variance Of The Return, Measured With Continuous Compounding, In One YearThe Standard Deviation Of The Stock Price In One YearThe Variance Of The Stock Price In One Year17.A Stock Price Is $100. Volatility Is Estimated To Be 20% Per Year. What Is The An Estimate Of The Standard Deviation Of The Change In The Stock Price In One Week (Circle One)$0.38$2.77$3.02$0.7618.To Create A Range Forward Contract In Order To Hedge Foreign Currency That Will Be Paid A Company Should (Circle One)Buy A Put And Sell A Call On The Currency With The Strike Price Of The Put Higher Than That Of The CallBuy A Put And Sell A Call On The Currency With The Strike Price Of The Put Lower Than That Of The CallBuy A Call And Sell A Put On The Currency With The Strike Price Of The Put Higher Than That Of The CallBuy A Call And Sell A Put On The Currency With The Strike Price Of The Put Lower Than That Of The Call17.When A Put Futures Is Exercised, The Holder Of The Put Acquires (Circle One) A Long Position In The Futures Contract A Short Position In The Futures Contract A Long Position In The Underlying Asset None Of The Above 18.When A Call Futures Is Exercised, The Holder Of The Call Acquires (Circle One) A Long Position In The Futures Contract A Short Position In The Futures Contract A Long Position In The Underlying Asset None Of The Above19. Suppose That General Motors Acceptance Corporation Issued A Bond With 10 Years Until Maturity, A Face Value Of $1000, And A Coupon Rate Of 7% (Annual Payments). The Yield To Maturity On This Bond When It Was Issued Was 6%.What Was The Price Of This Bond When It Was Issued?Assuming The Yield To Maturity Remains Constant, What Is The Price Of The Bond Immediately Before It Makes Its First Coupon Payment?Assuming The Yield To Maturity Remains Constant, What Is The Price Of The Bond Immediately After It Makes Its First Coupon Payment?20.What Is The Price Of A Five-Year, Zero-Coupon, Default-Free Security Of 4.8% With A Face Value Of $1000?The Price Of The Zero-Coupon Bond Is21.Draw The Diagram That Tells You If You Buy A Bond What Its Relationship Is To Call Yield, Yield To Maturity, And Yield To A Call.Using A Binomial Tree, What Is The Price Of A $40 Strike 6-Month Call Option, Using 3-Month Intervals As The Time Period? Assume The Following Data: S = $37.90, R = 5.0%, Σ = 0.352.502.762.923.0823. Compute Δ For The Following Call Option. The Stock Is Selling For $23.50. The Strike Price Is $25. The Possible Stock Prices At The End Of 6 Months Are $27.25 And $21.75. A) 0.4091 B) 0.6822 C) 0.8433 D) 0.9216 24. Using A Binomial Tree, What Is The Price Of A $40 Strike 6-Month Put Option, Using 3-Month Intervals As The Time Period? Assume The Following Data: S = $37.90, R = 5.0%, Σ = 0.35 A) $3.52 B) $3.66 C) $3.84 D) $3.91 Using Black-Scholes For The Last Two Problems.25. What Is The Delta On A $25 Strike Put? Assume S = $24.00, Σ = 0.35, R = 0.06, The Stock Pays A 2.0% Continuous Dividend And The Option Expires In 40 Days? A) 0.582 B) 0.602 C) 0.662 D) 0.702 26. Assume S = $33.00, Σ = 0.32, R = 0.06, Div = 0.01. You Short 100 $35 Strike Calls At 68 Days Until Expiration. Under A Delta Hedge Position, What Is Your Overnight Profit/Loss If The Stock Rises To $34.50? A) $9.23 Loss B) $9.23 Gain C) $7.62 Loss D) $7.62 Gain 1.Which Of The Following Is Not True (Circle One) When A CBOE Call Option On IBM Is Exercised, IBM Issues More Stock An American Option Can Be Exercised At Any Time During Its Life An Call Option Will Always Be Exercised At Maturity If The Underlying Asset Price Is Greater Than The Strike Price A Put Option Will Always Be Exercised At Maturity If The Strike Price Is Greater Than The Underlying Asset Price.When The Spot Price Is $58. The Spot Price In One Year Proves To Be $63. What Is The Trader’s Gain Or Loss? Show A Dollar Amount And Indicate Whether It Is A Gain Or A Loss. 3.A One-Year Call Option On A Stock With A Strike Price Of $30 Costs $3; A One-Year Put Option On The Stock With A Strike Price Of $30 Costs $4. Suppose That A Trader Buys Two Call Options And One Put Option. _ _ _ _ _ _ 5.In The Corn Futures Contract A Number Of Different Types Of Corn Can Be Delivered (With Price Adjustments Specified By The Exchange) And There Are A Number Of Different Delivery Locations. Which Of The Following Is True (Circle One) This Flexibility Tends Increase The Futures Price. This Flexibility Tends Decrease The Futures Price. This Flexibility May Increase And May Decrease The Futures Price. This Has No Effect On The Futures PriceA Hedger Takes A Long Position In An Oil Futures Contract On November 1, 2009 To Hedge An Exposure On March 1, 2010. The Initial Futures Price Is $60. On December 31, 1999 The Futures Price Is $61. On March 1, 2010 It Is $64. The Contract Is Closed Out On March 1, 2010. What Gain Is Recognized In The Accounting Year January 1 To December 31, 2010? Each Contract Is On 1000 Barrels Of Oil. _ _ _ _ _ _ An Investor Shorts 100 Shares When The Share Price Is $50 And Closes Out The Position Six Months Later When The Share Price Is $43. The Shares Pay A Dividend Of $3 Per Share During The Six Months. How Much Does The Investor Gain? _ _ _ _ _ _An Exchange Rate Is 0.7000 And The Six-Month Domestic And Foreign Risk-Free Interest Rates Are 5% And 7% (Both Expressed With Continuous Compounding). What Is The Six-Month Forward Rate? Give Four Decimal Places _ _ _ _ _ _The Spot Price Of An Asset Is Positively Correlated With The Market. Which Of The Following Would You Expect To Be True (Circle One) The Forward Price Equals The Expected Future Spot Price. The Forward Price Is Greater Than The Expected Future Spot Price. The Forward Price Is Less Than The Expected Future Spot Price. The Forward Price Is Sometimes Greater And Sometimes Less Than The Expected Future Spot Price.Is It Ever Optimal To Exercise Early An American Call Option On A) The Spot Price Of Gold, B) The Spot Price Of Copper, C) The Futures Price Of Gold, And D) The Average Price Of Gold Measured Between Time Zero And The Current Time? Explain Your Answers.10.A Call And A Put On A Stock Have The Same Strike Price And Time To Maturity. At 10:00am On A Certain Day, The Price Of The Call Is $3 And The Price Of The Put Is $4. At 10:01am News Reaches The Market That Has No Effect On The Stock Price Or Interest Rates, But Increases Volatilities. As A Result The Price Of The Call Changes To $4.50. What Would You Expect The Price Of The Put To Change To? _ _ _ _ _ _ 11.Six-Month Call Options With Strike Prices Of $35 And $40 Cost $6 And $4, Respectively.What Is The Maximum Gain When A Bull Spread Is Created From The Calls?_ _ _ _ _ _What Is The Maximum Loss When A Bull Spread Is Created From The Calls?_ _ _ _ _ _ _ _ _ _ _ _ 13.A Three-Month Call With A Strike Price Of $25 Costs $2. A Three-Month Put With A Strike Price Of $20 And Costs $3. A Trader Uses The Options To Create A Strangle. For What Two Values Of The Stock Price In Three Months Does The Trader Breakeven With A Profit Of Zero? 14.Which Two Statements Are True (Circle Two)Delta Is A Measure Of The Volatility Of An OptionDelta Is A Measure Of The Position In The Underlying Stock That Should Be Taken To Hedge An OptionDelta Is Estimated By Considering Two Adjacent Nodes On A Tree At A Certain Time And Calculating The Difference In Option Prices Divided By The Difference In The Stock PricesThe Delta Of A Put Option Is Positive 15.The Black-Scholes-Merton Model Assumes (Circle One)The Return From The Stock In A Short Period Of Time Is LognormalThe Stock Price At A Future Time Is LognormalThe Stock Price At A Future Time Is NormalNone Of The Above16.Volatility Can Be Defined As (Circle One)The Standard Deviation Of The Return, Measured With Continuous Compounding, In One YearThe Variance Of The Return, Measured With Continuous Compounding, In One YearThe Standard Deviation Of The Stock Price In One YearThe Variance Of The Stock Price In One Year17.A Stock Price Is $100. Volatility Is Estimated To Be 20% Per Year. What Is The An Estimate Of The Standard Deviation Of The Change In The Stock Price In One Week (Circle One)$0.38$2.77$3.02$0.7618.To Create A Range Forward Contract In Order To Hedge Foreign Currency That Will Be Paid A Company Should (Circle One)Buy A Put And Sell A Call On The Currency With The Strike Price Of The Put Higher Than That Of The CallBuy A Put And Sell A Call On The Currency With The Strike Price Of The Put Lower Than That Of The CallBuy A Call And Sell A Put On The Currency With The Strike Price Of The Put Higher Than That Of The CallBuy A Call And Sell A Put On The Currency With The Strike Price Of The Put Lower Than That Of The Call17.When A Put Futures Is Exercised, The Holder Of The Put Acquires (Circle One) A Long Position In The Futures Contract A Short Position In The Futures Contract A Long Position In The Underlying Asset None Of The Above 18.When A Call Futures Is Exercised, The Holder Of The Call Acquires (Circle One) A Long Position In The Futures Contract A Short Position In The Futures Contract A Long Position In The Underlying Asset None Of The Above19. Suppose That General Motors Acceptance Corporation Issued A Bond With 10 Years Until Maturity, A Face Value Of $1000, And A Coupon Rate Of 7% (Annual Payments). The Yield To Maturity On This Bond When It Was Issued Was 6%.What Was The Price Of This Bond When It Was Issued?Assuming The Yield To Maturity Remains Constant, What Is The Price Of The Bond Immediately Before It Makes Its First Coupon Payment?Assuming The Yield To Maturity Remains Constant, What Is The Price Of The Bond Immediately After It Makes Its First Coupon Payment?20.What Is The Price Of A Five-Year, Zero-Coupon, Default-Free Security Of 4.8% With A Face Value Of $1000?The Price Of The Zero-Coupon Bond Is21.Draw The Diagram That Tells You If You Buy A Bond What Its Relationship Is To Call Yield, Yield To Maturity, And Yield To A Call.Using A Binomial Tree, What Is The Price Of A $40 Strike 6-Month Call Option, Using 3-Month Intervals As The Time Period? Assume The Following Data: S = $37.90, R = 5.0%, Σ = 0.352.502.762.923.0823. Compute Δ For The Following Call Option. The Stock Is Selling For $23.50. The Strike Price Is $25. The Possible Stock Prices At The End Of 6 Months Are $27.25 And $21.75. A) 0.4091 B) 0.6822 C) 0.8433 D) 0.9216 24. Using A Binomial Tree, What Is The Price Of A $40 Strike 6-Month Put Option, Using 3-Month Intervals As The Time Period? Assume The Following Data: S = $37.90, R = 5.0%, Σ = 0.35 A) $3.52 B) $3.66 C) $3.84 D) $3.91 Using Black-Scholes For The Last Two Problems.25. What Is The Delta On A $25 Strike Put? Assume S = $24.00, Σ = 0.35, R = 0.06, The Stock Pays A 2.0% Continuous Dividend And The Option Expires In 40 Days? A) 0.582 B) 0.602 C) 0.662 D) 0.702 26. Assume S = $33.00, Σ = 0.32, R = 0.06, Div = 0.01. You Short 100 $35 Strike Calls At 68 Days Until Expiration. Under A Delta Hedge Position, What Is Your Overnight Profit/Loss If The Stock Rises To $34.50? A) $9.23 Loss B) $9.23 Gain C) $7.62 Loss D) $7.62 Gain