31.Which of the following will increase in price as the value of the underlying asset decreases in price, from the option holder’s perspective?
a.call option
b.put option
c.a long future position.
d.none of the above.
32.You notice that you can purchase an option for $5. The price of the underlying stock is currently $42. What is the option premium for this option?
a.$5
b.$37
c.$42
d.$47
33.You currently own a put option on Stock X with a strike price of $25. If the current price of Stock X is $30, then what is the in-the-money amount of the option?
a.-$5
b.$0
c.$5
d.none of the above
34.You own a put option on a stock and the strike price of the option is $30. The option has 3 weeks until expiration and the stock is currently priced at $35 per share. What is the largest payout possible for this put option? Ignore the original cost of the option for the payout calculation.
a.$0
b.$5
c.$30
d.the payout is unlimited
35.You own a call option on a stock and the strike price of the option is $30. The option has 3 weeks until expiration and the stock is currently priced at $35 per share. What is the largest payout possible for this call option? Ignore the original cost of the option for the payout calculation.
a.$0
b.$5
c.$30
d.there is an unlimited possible payout on this option
36.You sold a call option on a stock and the strike price of the option is $30. The option has 3 weeks until expiration and the stock is currently priced at $35 per share. You originally sold the call option for $3. What is the largest payout possible total payout to you for this call option?
a.$0
b.$3
c.$5
d.$30
37.You find that an investor purchases a put option on shares of Company Z stock. What is the most likely reason that an investor would make such a purchase?
a.the investor believes that Company Z is an undervalued company
b.the investor believes that Company Z in an overvalued company
c.the investor would like to speculated that Company Z’s stock price will randomly increase
d.none of the above
38.You purchase a call option and a put option on the shares of a company. The sticker price and expiration date for the options is equal. What is the best description of the combined payoff diagram for the combination of the two options?
a.an upward sloping straight line
b.a downward sloping straight line
c.a v-shaped diagram with the kink at the strike price of the options
d.an upside down v-shaped diagram with the kink at the strike price of the options
39.You own 100 shares of a stock with a current price of $50 and you also own a put option of 100 shares of the stock with a strike price of $45. What is the minimum value of your portfolio at expiration? Ignore the original cost of the put option for your calculation.
a.$50
b.$45
c.$5
d.$0
40.You notice that the price of a one-year call option, with a $40 strike price, is $5. The current price of the underlying stock is also $40. What should the price of a one-year put option be with a strike price of $40? Assume that the interest rate on a one-year risk free bond is 10%.
a.$5
b.$0
c.$1.36
d.$8.63
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