Download Quiz 4 with Answer Key - Investments | BMGT 343 and more Quizzes Investment Theory in PDF only on Docsity! l. ) Bt'lqTgtB Quiz 4 (double sided) PrintYour Name: Your ID: Your Score: are securities with embedded 6ptions. a. Callable bonds b. Convertible bonds c. Putable bonds d. All of the above An American put option grves its holder the right to _. buy the underlving asset at the exercise price on or before the expiration date buy the underlying asset at the exercise price only at the expiration date sell the underlying asset at t}re exercise price on or before the expiration date sell the underlying asset at the exercise price only at the expiration date 3. Aput option on Snapple Beverage has an exercise price of$30. The current stock price of Srnpple Beverage is $24.25. The put option is a. At the money b. In the money c. Out of the money d. None of the above According to the put-call parity theorern, the payoffs associated with ownership of a call option can be replicated b-"* _ a. shorting the underlying stock, borrowing the present value of the exercise price, and writing a put on the same underlying stock and with same exercise price b. buying the underlying stock, borrowing the present value of the exercise price, and buy*g a put on the same underlying stock and with same exercise price c. buying the underlying siock, the present value of the exercise price, and rwiting a put on the same underlying stock and with same exercise price d. none ofthe above Company X's current stock price is 40. It can go up by 50% or go down by 50% in the first period and can go up by 40o/o or go down by 60Yo in the second period. The interest rate for the first period is l0% and that for the second perid is 5%. Consider a call option with strike price 20 maturing in tlyo periods. What must be the call price a. 510.23 b. $30.65 c.$24.14 d. $17.38 A stock-or-nothing option pays the stock price if the maturity date stock price is above a pre-specified price or nothing otherwise. The stock price of Risky Corp is currentlv 100. The stock price a year from now-will be either $200 with 7|o/oprobability or $50 with 30% probability. Price a stock-or-nothing option on this stock with the pre-specified price at 120. The interest rate is 107o. a.43.64 b.72.73 c. 65.45 d. 59.-s0 You are considering purchasing a put option on a stock with a current price of $40. The exercise price is $35, and the price of the corresponding call optron is $7. According to the put-call parity theorem, if the risk-free rate of interest is 4Yo, and there are 60 days until expiration (2 months) , the value of the put should be a.$2.77 b. $3.00 c. $1.77 d. $9.00 8. A call option on Juniper Corp. stock with an exercise price of $75 and an expiration date one year from now is worth $5.00 today. A put option on Juniper Corp. stock with an exercise price of $75 and an expiralion date one year from now is worth $2.75 today. The a. b. d. 4.
