Bond and Market Capitalization Rate
330-s2013-prac9
1. An American put option gives its holder the right to _________.
A. buy the underlying asset at the exercise price on or before the expiration date
B. buy the underlying asset at the exercise price only at the expiration date
C. sell the underlying asset at the exercise price on or before the expiration date
D. sell the underlying asset at the exercise price only at the expiration date
2. An American call option gives the buyer the right to _________.
A. buy the underlying asset at the exercise price on or before the expiration date
B. buy the underlying asset at the exercise price only at the expiration date
C. sell the underlying asset at the exercise price on or before the expiration date
D. sell the underlying asset at the exercise price only at the expiration date
3. A European call option gives the buyer the right to _________.
A. buy the underlying asset at the exercise price on or before the expiration date
B. buy the underlying asset at the exercise price only at the expiration date
C. sell the underlying asset at the exercise price on or before the expiration date
D. sell the underlying asset at the exercise price only at the expiration date
4. You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment.
A. $200 profit B. $200 loss C. $300 profit D. $300 loss
5. At contract maturity the value of a call option is ___________ where X equals the option 's strike price and ST is the stock price at contract expiration.
A. Max(0, ST - X) B. Min(0, ST - X) C. Max(0, X - ST) D. Min(0, X - ST) 1
1. C 2. A 3. B 4. B 5. A
Long Call Profit = Max[0,($123 - $120)(100)] - $500 = -$200
1. A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information
1. An American put option gives its holder the right to _________.
A. buy the underlying asset at the exercise price on or before the expiration date
B. buy the underlying asset at the exercise price only at the expiration date
C. sell the underlying asset at the exercise price on or before the expiration date
D. sell the underlying asset at the exercise price only at the expiration date
2. An American call option gives the buyer the right to _________.
A. buy the underlying asset at the exercise price on or before the expiration date
B. buy the underlying asset at the exercise price only at the expiration date
C. sell the underlying asset at the exercise price on or before the expiration date
D. sell the underlying asset at the exercise price only at the expiration date
3. A European call option gives the buyer the right to _________.
A. buy the underlying asset at the exercise price on or before the expiration date
B. buy the underlying asset at the exercise price only at the expiration date
C. sell the underlying asset at the exercise price on or before the expiration date
D. sell the underlying asset at the exercise price only at the expiration date
4. You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment.
A. $200 profit B. $200 loss C. $300 profit D. $300 loss
5. At contract maturity the value of a call option is ___________ where X equals the option 's strike price and ST is the stock price at contract expiration.
A. Max(0, ST - X) B. Min(0, ST - X) C. Max(0, X - ST) D. Min(0, X - ST) 1
1. C 2. A 3. B 4. B 5. A
Long Call Profit = Max[0,($123 - $120)(100)] - $500 = -$200
1. A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information