Podcast
Questions and Answers
Which one of the following is the correct definition of a call option?
Which one of the following is the correct definition of a call option?
- A contract that grants the owner the right to buy an underlying asset at a specified price on or before a specified date (correct)
- A contract that grants the owner the obligation to buy an underlying asset at a specified price on or before a specified date
- A contract that grants the owner the right to sell an underlying asset at a specified price on or before a specified date
- A contract that grants the owner the obligation to sell an underlying asset at a specified price on or before a specified date
What is the strike price for the call option on Fincorp stock?
What is the strike price for the call option on Fincorp stock?
- $1.52
- $27.50 (correct)
- $0.24
- $28.72
What is the expiration date for the call option on Fincorp stock?
What is the expiration date for the call option on Fincorp stock?
- June 7th
- June 1st
- May 7th (correct)
- May 1st
What is the price of the call option per share?
What is the price of the call option per share?
What is the price of Fincorp stock today?
What is the price of Fincorp stock today?
How many shares of Fincorp stock can be purchased with the call option?
How many shares of Fincorp stock can be purchased with the call option?
What is the total cost to buy the call option for 100 shares of Fincorp stock?
What is the total cost to buy the call option for 100 shares of Fincorp stock?
Which of the following is true about the payoff and profit to a call option at expiration?
Which of the following is true about the payoff and profit to a call option at expiration?
What is the slope of the lines that slope upwards in the payoff and profit diagram for a call option at expiration?
What is the slope of the lines that slope upwards in the payoff and profit diagram for a call option at expiration?
What is a 'naked option'?
What is a 'naked option'?
What is the potential loss for an option writer?
What is the potential loss for an option writer?
What is the return in the $95 column for Strategy A (investing entirely in stock)?
What is the return in the $95 column for Strategy A (investing entirely in stock)?
Why is the payoff $0 to Strategy B (investing entirely in at-the-money call options) if the stock price remains at $100?
Why is the payoff $0 to Strategy B (investing entirely in at-the-money call options) if the stock price remains at $100?
Why are the upward slopes different for the various strategies in Figure 20.5?
Why are the upward slopes different for the various strategies in Figure 20.5?
Which one of these is true about a put option?
Which one of these is true about a put option?
What is the value of a call option at expiration?
What is the value of a call option at expiration?
What is the payoff to a call holder at expiration?
What is the payoff to a call holder at expiration?
What is the payoff to a call writer at expiration?
What is the payoff to a call writer at expiration?
What is the payoff per share for a call option if the stock price goes up to $152 and the exercise price is $150?
What is the payoff per share for a call option if the stock price goes up to $152 and the exercise price is $150?
What is the profit for a call option if the stock price goes up to $152, the exercise price is $150, and the premium paid for the option is $4.10?
What is the profit for a call option if the stock price goes up to $152, the exercise price is $150, and the premium paid for the option is $4.10?
What is the holding period return for a call option if the stock price goes up to $152, the exercise price is $150, and the premium paid for the option is $4.10?
What is the holding period return for a call option if the stock price goes up to $152, the exercise price is $150, and the premium paid for the option is $4.10?
According to the text, which approach uses a cumulative normal distribution to describe the likely future price outcomes and assesses the probability those outcomes will be in the money or not?
According to the text, which approach uses a cumulative normal distribution to describe the likely future price outcomes and assesses the probability those outcomes will be in the money or not?
According to the text, which approach uses a lattice with fixed probabilities to describe the likely future price outcomes and assesses the probability those outcomes will be in the money or not?
According to the text, which approach uses a lattice with fixed probabilities to describe the likely future price outcomes and assesses the probability those outcomes will be in the money or not?
According to the text, in both the Black Scholes Model and the Binomial Lattice Approach, what factors would lead to an increase in call option value?
According to the text, in both the Black Scholes Model and the Binomial Lattice Approach, what factors would lead to an increase in call option value?
According to the text, in both the Black Scholes Model and the Binomial Lattice Approach, what factors would lead to a decrease in call option value?
According to the text, in both the Black Scholes Model and the Binomial Lattice Approach, what factors would lead to a decrease in call option value?
According to the text, what is the value of a call option in the Black-Scholes option pricing formula?
According to the text, what is the value of a call option in the Black-Scholes option pricing formula?
According to the text, what is the cumulative unit normal distribution function evaluated at d1 in the Black-Scholes option pricing formula?
According to the text, what is the cumulative unit normal distribution function evaluated at d1 in the Black-Scholes option pricing formula?
According to the text, what is the binomial lattice used for in option valuation?
According to the text, what is the binomial lattice used for in option valuation?
According to the text, what does an increase in stock price lead to in call option valuation?
According to the text, what does an increase in stock price lead to in call option valuation?
According to the text, what does higher volatility in outcomes lead to in option valuation?
According to the text, what does higher volatility in outcomes lead to in option valuation?
