36940493 fin512 习题1 without answers

5/19/2018 36940493 Fin512 1 Without Answers

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1.A transaction in which an investor holds a position in the spotmarket and sells a futures contract or writes a call is (Points :1)

a gamble

a speculative position

a hedge

a risk-free transaction

none of the above

2.Which of the following are advantages of derivatives? (Points :1)

lower transaction costs than securities and commodities

reveal information about expected prices and volatility

help control riskmake spot prices stay closer to their true values

all of the above

3.A forward contract has which of the following characteristics?(Points :1)

has a buyer and a seller

trades on an organized exchange

has a daily settlement

gives the right but not the obligation to buy

all of the above

4.Options on futures are also known as (Points :1)

spot options

commodity options

exchange options

security options

none of the above

5.A market in which the price equals the true economic value (Points:1)


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is risk-free

has high expected returns

is organized

is efficientall of the above

6.Which of the following trade on organized exchanges? (Points :1)

caps

forwards

options

swaps

none of the above

7.Which of the following markets is/are said to provide pricediscovery? (Points :1)

futures

forwards

options

a and bb and c

8.Investors who do not consider risk in their decisions are said to be(Points :1)

speculating

short selling

risk neutral

traders

none of the above

9.Which of the following statements is not true about the law of oneprice (Points :1)


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investors prefer more wealth to less

investments that offer the same return in all states must paythe risk-free rate

if two investment opportunities offer equivalent outcomes,

they must have the same price

investors are risk neutral

none of the above

10.Which of the following contracts obligates a buyer to buy or sell

something at a later date? (Points :1)

call

futures

cap

put

swaption

11.A call option priced at $2 with a stock price of $30 and an exerciseprice of $35 allows the holder to buy the stock at (Points :1)

$2

$32

$33

$35

none of the above

12.A put option in which the stock price is $60 and the exercise priceis $65 is said to be (Points :1)

in-the-money

out-of-the-money

at-the-money

exercisable

none of the above


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13.Organized options markets are different from over-the-counteroptions markets for all of the following reasons except (Points :1)

exercise terms

physical trading floor

regulation

standardized contracts

credit risk

14.The number of options acquired when one contract is purchased

on an exchange is (Points :1)

1

5

100

500

8,000

15.The advantages of the over-the-counter options market include allof the following except (Points :1)

customized contracts

privately executed

freedom from government regulation

lower prices

none of the above

16.Which one of the following is not a type of transaction cost inoptions trading? (Points :1)

the bid-ask spread

the commission

clearing fees

the cost of obtaining a quote

all of the above


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17.If the market maker will buy at 4 and sell at 4.50, the bid-askspread is (Points :1)

8.50

4.25

0.50

4.00

none of the above

18.Which of the following is a legitimate type of option order on the

exchange? (Points :1)

purchase order

limit order

execution order

floor order

all of the above

19.The exercise price can be set at any desired level on each of thefollowing types of options except (Points :1)

FLEX options

equity options

over-the-counter options

all of the above

none of the above

20.An investor who owns a call option can close out the position byany of the following types of transactions except (Points :1)

exercise

offset

expiring out-of-the-money

buying a put

none of the above


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21.Which type of trader legitimately practices dual trading? (Points:1)

floor brokers

off-floor option traders

board brokers

designated primary market makers

none of the above

22.The option price is also referred to as the (Points :1)

strike

spread

premiumfee

none of the above

23.Index options trading on organized exchanges expire according towhich of the following cycles? (Points :1)

March, June, September, and December

each of the next four consecutive months

the current month, the next month, and the next two monthsin one of the other cycles

every other month for each of the next nine months

none of the above

24.An investor who exercises a call option on an index must (Points:1)

accept the cash difference between the index and the exercise

price

purchase all of the stocks in the index in their appropriateproportions from the writer

immediately buy a put option to offset the call option

immediately write another call option to offset

none of the above


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25.Which of the following are long-term options? (Points :1)

Bond options

LEAPScurrency options

Nikkei put warrants

none of the above

26.The exchange with the largest share of the options market is the(Points :1)

American Stock Exchange

Boston Options Exchange

Chicago Board Options Exchange

Pacific Stock Exchange

Philadelphia Stock Exchange

27.A writer selected to exercise an option is said to be (Points :1)

marginal

assigned

restricted

designated

none of the above

28.All of the following are forms of options except (Points :1)

convertible bonds

callable bondswarrants

mutual funds

none of the above

29.Which of the following index options is the most widely traded?


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(Points :1)

S&P 500

Nikkei 225

Technology Index

New York Stock Exchange Index

none of the above

30.The following quotes were observed for options on a given stock on November 1 of agiven year. These are American calls except where indicated. Use the information

to answer questions 30 through 38.

Calls Puts

Strike Nov Dec Jan Nov Dec Jan

105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50

percent (December) and 7.62 percent (January). The times to expiration were

0.0384 (November), 0.1342 (December), and 0.211 (January). Assume nodividends unless indicated

What is the intrinsic value of the December 115 put? (Points :1)

1.75

0.00

3.90

3.00

none of the above

31.

The following quotes were observed for options on a given stock on November 1 of agiven year. These are American calls except where indicated. Use the information


Calls Puts


105 8.4 10 11.5 5.3 1.3 2


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110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8


percent (December) and 7.62 percent (January). The times to expiration were


What is the intrinsic value of the November 105 put? (Points :1)

0.30

8.25

8.50

0.00

none of the above

32.The following quotes were observed for options on a given stock on November 1 of a

given year. These are American calls except where indicated. Use the informationto answer questions 30 through 38.

Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8


percent (December) and 7.62 percent (January). The times to expiration were0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no

dividends unless indicated

What is the intrinsic value of the January 110 call? (Points :1)

0.00

8.30

3.75

5.00

none of the above


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Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8




What is the intrinsic value of the November 115 call? (Points :1)

1.50

0.00

2.80

1.75

none of the above



Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50percent (December) and 7.62 percent (January). The times to expiration were

0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no



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What is the time value of the December 105 put? (Points :1)

1.30

8.300.00

7.00

none of the above



Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8




What is the time value of the November 115 put? (Points :1)

1.75

2.80

1.10

0.00

none of the above




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Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8



What is the time value of the November 110 call? (Points :1)

0.00

4.40

1.15

3.25

none of the above


given year. These are American calls except where indicated. Use the information


Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8



What is the time value of the January 115 call? (Points :1)

5.30

0.00


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3.50

1.70

none of the above


given year. These are American calls except where indicated. Use the informationto answer questions 30 through 38.

Calls Puts


105 8.4 10 11.5 5.3 1.3 2

110 4.4 7.1 8.3 0.9 2.5 3.8

115 1.5 3.9 5.3 2.8 4.8 4.8




What is the European lower bound of the December 105 call? (Points:1)

9.860.00

8.25

9.26

none of the above

39.The time value of an option is also referred to as the (Points :1)

synthetic value

strike value

speculative value

parity value

none of the above


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40.Which of the following is the lowest possible value of an Americancall on a stock with no dividends? (Points :1)

Max(0, S0 - X(1 + r)-T)

S0

Max(0, S0 - X)

Max(0, S0 (1 + r)-T - X)

none of the above

41.Which of the following is the lowest possible value of an American

put on a stock with no dividends? (Points :1)

X(1 + r)-T

X

Max(0, X(1 + r)-T - S0)

Max(0, X - S0)

none of the above

42.The difference between a Treasury bill's face value and its price iscalled the (Points :1)

time value

discount

coupon rate

bid

none of the above

43.Which of the following statements about an American call is nottrue? (Points :1)

Its time value decreases as expiration approaches

Its maximum value is the stock price

It can be exercised prior to expiration

It pays dividends

none of the above


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44.When puts are priced with the binomial model, which of thefollowing is true? (Points :1)

the puts must be American

the puts cannot be properly hedged

the puts will violate put-call parity

the hedge ratio is one throughout the tree

none of the above

45.If the binomial model is extended to multiple periods for a fixed

option life, which of the following adjustments must be made? (Points:1)

the up and down factors must be increased

the risk-free rate must be increased

the up and down factors and the risk-free rate must bedecreased

the initial stock price must be proportionately reduced

none of the above

46.Which of the following are not path-dependent options when thestock pays a constant dividend yield? (Points :1)

European calls and European puts

European calls and American puts

American puts and European puts

American puts and European calls

none of the above

47.In a non-recombining tree, the number of paths that will occur

after three periods is (Points :1)three

four

ten

eight

six


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48.When the number of time periods in a binomial model is large, aEuropean call option value does what? (Points :1)

fluctuates around its intrinsic value

converges to a specific value

increases without limit

converges to the European lower bound

none of the above

49.When the number of time periods in a binomial model is large,what happens to the binomial probability of an up move? (Points :1)

it approaches 1.0

it approaches zero

it fluctuates without pattern

it converges to 0.5

none of the above

50.Consider a binomial world in which the current stock price of 80 can

either go up by 10 percent or down by 8 percent. The risk-free rate is4 percent. Assume a one-period world. Answer questions 50 through53 about a call with an exercise price of 80.

What would be the call's price if the stock goes up? (Points :1)

3.60

8.00

5.71

4.39

none of the above

51.Consider a binomial world in which the current stock price of 80 caneither go up by 10 percent or down by 8 percent. The risk-free rate is


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4 percent. Assume a one-period world. Answer questions 50 through53 about a call with an exercise price of 80.

What would be the call's price if the stock goes down? (Points :1)

8.00

3.60

0.00

9.00

none of the above

52.

Consider a binomial world in which the current stock price of 80 caneither go up by 10 percent or down by 8 percent. The risk-free rate is4 percent. Assume a one-period world. Answer questions 50 through53 about a call with an exercise price of 80.

What is the hedge ratio? (Points :1)

0.429

0.714

0.571

0.823

none of the above

53.Consider a binomial world in which the current stock price of 80 caneither go up by 10 percent or down by 8 percent. The risk-free rate is4 percent. Assume a one-period world. Answer questions 50 through53 about a call with an exercise price of 80.

What is the theoretical value of the call? (Points :1)

8.00

4.39

5.15


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5.36

none of the above

54.Consider a binomial world in which the current stock price of 80 caneither go up by 10 percent or down by 8 percent. The risk-free rate is4 percent. Assume a two-period world. Answer questions 54 through56 about a call with an exercise price of 80.

What is the value of the call if the stock goes up, then down? (Points:1)

0.96

16.80

8.00

0.00

none of the above


4 percent. Assume a two-period world. Answer questions 54 through56 about a call with an exercise price of 80.

What is the hedge ratio if the stock goes down one period? (Points :1)

0.00

0.0725

1.00

0.73

none of the above



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4 percent. Assume a two-period world. Answer questions 54 through56 about a call with an exercise price of 80.

What is the current value of the call? (Points :1)

8.00

7.30

11.13

0.619

none of the above

57.In the binomial model, if an option has no chance of expiring out-

of-the-money, the hedge ratio will be (Points :1)

0.5

infinite

1

0

none of the above


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58.Suppose S = 70, X = 65, r = 0.05, p = 0.6, Cu = 7.17, Cd = 1.22

and there is one period left in an American call's life. What will the

option be worth? (Points :1)

6.83

0.00

4.56

5.00

none of the above

59.In a one-period binomial model with Su = 49.5, Sd = 40.5, p =

0.8, r = 0.06, S = 45 and X = 50, what is a European put worth?

(Points :1)

2.17

0.50

9.50

5.00

none of the above


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60.Which of the following statements about the binomial model is

incorrect? (Points :1)

it converges to the Black-Scholes-Merton model

it can accommodate early exercise

it allows only two stock prices at expiration

it can be extended to a large number of time periods

none of the above

36940493 fin512 习题1 without answers

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