Question

3..

1,

Which of the following statements is true?

Select one:

a. It is possible to make conclusions about the value of stock options without making any assumption about the volatility of stock prices.

b. The put-call parity also hold for American options

c. The value of a call generally increases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.

d. The value of a put generally decreases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.

2.

Which of the following describes a long position in an option?

Select one:

a. A position that has been held for a long time

b. A position where an option has been purchased

c. A position where there is more than five years to maturity

d. A position where there is more than five years to maturity

3.

Fill in the blank in the following statement:

“If an option price is _____ the upper bound or below the lower bound, there are profitable opportunities for arbitrageurs.”

Select one:

a. equal to

b. below

c. above

d. None of those above

4.

Fill the blanks in the following sentence:

“Put–call parity is a relationship between the _____, c, of a European call option on a stock and the price, p, of a European put option on a stock.”

Select one:

a. bid

b. offer

c. price

d. volume

5.

In which of the following cases is an asset NOT considered constructively sold?

Select one:

a. The owner shorts a futures contract on the stock

b. The owner shorts a forward contract on the asset

c. The owner buys an in-the-money put option on the asset

d. The owner shorts the asset

6.

Which of the following statements is false?

Select one:

a. The risk-free interest rate does not heavily affect the price of an option.

b. Stock prices tend to increase (decrease) when interest rates fall (rise).

c. The value of a call option is negatively related to the size of any anticipated dividends.

d. Stock prices tend to increase (decrease) when interest rates rise (fall).

7.

Which of the following describes a short position in an option?

Select one:

a. A position in an option lasting less than three months

b. A position in an option lasting less than one month

c. A position where an option has been sold

d. A position in an option lasting less than six months

8.

Fill in the blank in the following text:

"If interest rates in the economy increase, the expected return required by investors from the stock market is likely to ______. "

Select one:

a. stay the same

b. balance

c. decrease

d. increase

9.

A trader buys a call and sells a put with the same strike price and maturity date. What is the position equivalent to?

Select one:

a. a long forward

b. a short forward

c. buying the asset

d. None of the above answers

Answer 1

1.
Which of the following statements is true?
d. The value of a put generally decreases as current stock price, the time to expiration, the volatility and the risk-free interest rate decrease.

2.

Which of the following describes a long position in an option?
b. A position where an option has been purchased

3.

Fill in the blank in the following statement:

“If an option price is _____ the upper bound or below the lower bound, there are profitable opportunities for arbitrageurs.”
c. above

4.

Fill the blanks in the following sentence:

“Put–call parity is a relationship between the _____, c, of a European call option on a stock and the price, p, of a European put option on a stock.”
c. price

5.

In which of the following cases is an asset NOT considered constructively sold?
c. The owner buys an in-the-money put option on the asset

6.

Which of the following statements is false?
d. Stock prices tend to increase (decrease) when interest rates rise (fall).

7.

Which of the following describes a short position in an option?
c. A position where an option has been sold

8.

Fill in the blank in the following text:

"If interest rates in the economy increase, the expected return required by investors from the stock market is likely to ______. "
d. increase