Question : 51.An investor that purchases a call option XYZ stock, hoping : 1325796

51.An investor that purchases a call option on XYZ stock, is hoping that XYZ stock price will:

a.be below the strike price at expiration

b.be above the strike price at expiration

c.be equal to the strike price at expiration

d.none of the above

52.An investor that purchases a put option on ABC stock is hoping that ABC stock will:

a.fall below the put strike price at expiration.

b.rise above the put strike price at expiration.

c.equal the put strike price at expiration.

d.none of the above

53.An investor that writes a naked call could be considered:

a.bullish

b.bearish

c.neutral

d.risk averse

54.ABC stock is currently trading at $28. A call option on ABC with a strike price of $30 and 3 months to expiration trades for $2.75. In order for the option to be considered in the money at expiration, ABC stuck must:

a.be greater than $30.75

b.be greater than $32.75

c.be greater than $30

d.be less than $27.25

55.A put on United Pipeline has 1 year to maturity and a strike price of $45. If an investor purchases that option for $3.25 then in order for the investor to break even, United Pipeline’s stock price on the expiration date must equal

a.$45

b.$48.25

c.$41.75

d.none of the above

56.An investor purchases 2 call options on XYZ stock with a strike price of $50. The call premium is $2.65 each. The investor will breakeven at expiration if the stock price of XYZ is:

a.$50

b.$47.35

c.$55.30

d.$52.65

57.Which of the following conditions must be met in order for put – call parity to hold.

a.The call and put options must be on the same underlying stock

b.The call and put options must have the same expiration date

c.Both options should be European options

d.All of the above

58.An investor that writes a covered call

a.receives a premium for the option he sells.

b.speculates that the stock price will increase above the strike price

c.benefits if the stock price increases above the strike price.

d.pays a premium to the call seller for downside protection on his stock

59.The main difference between an American and a European option is that

a.European options are priced in Euros and American options are priced in dollars.

b.American options can be exercised at any time until expiration while European options can only be exercised on expiration date

c.European options can be exercised at any time until expiration while American options can only be exercised on expiration date

d.American options are standardized contracts while European options are not.

60.Kenly Bennett XIV wants to short shares of Axline Industries. However his broker can not find shares available to short. To synthetically produce a short strategy on Axline Industries, Kenly could

a.Buy a put, sell a zero coupon bond with a face value equal to the strike price of the put and the call, and sell a call.

b.Buy a put, sell a zero coupon bond with a face value equal to the strike price of the put and the call, and buy a call.

c.Sell a put, buy a zero coupon bond with a face value equal to the strike price of the put and the call, and sell a call.

d.Buy a put, buy a zero coupon bond with a face value equal to the strike price of the put and the call, and sell a call.