Chapter 20 Options Markets Introduction.docx

1、Chapter 20 Options Markets IntroductionChapter 20Options Markets: Introduction Multiple Choice Questions1.The price that the buyer of a call option pays to acquire the option is called theA.strike price.B.exercise price.C.execution price.D.acquisition price.E.premium.2.The price that the writer of a

2、 call option receives to sell the option is called theA.strike price.B.exercise price.C.execution price.D.acquisition price.E.premium.3.The price that the buyer of a put option pays to acquire the option is called theA.strike price.B.exercise price.C.execution price.D.acquisition price.E.premium.4.T

3、he price that the writer of a put option receives to sell the option is called theA.premium.B.exercise price.C.execution price.D.acquisition price.E.strike price.5.The price that the buyer of a call option pays for the underlying asset if she executes her option is called theA.strike price.B.exercis

4、e price.C.execution price.D.strike price or execution price.E.strike price or exercise price.6.The price that the writer of a call option receives for the underlying asset if the buyer executes her option is called theA.strike price.B.exercise price.C.execution price.D.strike price or exercise price

5、.E.strike price or execution price.7.The price that the buyer of a put option receives for the underlying asset if she executes her option is called theA.strike price.B.exercise price.C.execution price.D.strike price or execution price.E.strike price or exercise price.8.The price that the writer of

6、a put option receives for the underlying asset if the option is exercised is called theA.strike price.B.exercise price.C.execution price.D.strike price or exercise price.E.None of these is correct.9.An American call option allows the buyer toA.sell the underlying asset at the exercise price on or be

7、fore the expiration date.B.buy the underlying asset at the exercise price on or before the expiration date.C.sell the option in the open market prior to expiration.D.sell the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expir

8、ation.E.buy the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expiration.10.A European call option allows the buyer toA.sell the underlying asset at the exercise price on the expiration date.B.buy the underlying asset at the e

9、xercise price on or before the expiration date.C.sell the option in the open market prior to expiration.D.buy the underlying asset at the exercise price on the expiration date.E.sell the option in the open market prior to expiration and buy the underlying asset at the exercise price on the expiratio

10、n date.11.An American put option allows the holder toA.buy the underlying asset at the striking price on or before the expiration date.B.sell the underlying asset at the striking price on or before the expiration date.C.potentially benefit from a stock price increase.D.sell the underlying asset at t

11、he striking price on or before the expiration date and potentially benefit from a stock price increase.E.buy the underlying asset at the striking price on or before the expiration date and potentially benefit from a stock price increase.12.A European put option allows the holder toA.buy the underlyi

12、ng asset at the striking price on or before the expiration date.B.sell the underlying asset at the striking price on or before the expiration date.C.potentially benefit from a stock price increase.D.sell the underlying asset at the striking price on the expiration date.E.potentially benefit from a s

13、tock price increase and sell the underlying asset at the striking price on the expiration date.13.An American put option can be exercisedA.any time on or before the expiration date.B.only on the expiration date.C.any time in the indefinite future.D.only after dividends are paid.E.None of these is co

14、rrect.14.An American call option can be exercisedA.any time on or before the expiration date.B.only on the expiration date.C.any time in the indefinite future.D.only after dividends are paid.E.None of these is correct.15.A European call option can be exercisedA.any time in the future.B.only on the e

15、xpiration date.C.if the price of the underlying asset declines below the exercise price.D.immediately after dividends are paid.E.None of these is correct.16.A European put option can be exercisedA.any time in the future.B.only on the expiration date.C.if the price of the underlying asset declines be

16、low the exercise price.D.immediately after dividends are paid.E.None of these is correct.17.To adjust for stock splitsA.the exercise price of the option is reduced by the factor of the split and the number of options held is increased by that factor.B.the exercise price of the option is increased by

17、 the factor of the split and the number of options held is reduced by that factor.C.the exercise price of the option is reduced by the factor of the split and the number of options held is reduced by that factor.D.the exercise price of the option is increased by the factor of the split and the numbe

18、r of options held is increased by that factor.E.None of these is correct18.All else equal, call option values are lowerA.in the month of May.B.for low dividend payout policies.C.for high dividend payout policies.D.in the month of May and for low dividend payout policies.E.in the month of May and for

19、 high dividend payout policies.19.All else equal, call option values are higherA.in the month of May.B.for low dividend payout policies.C.for high dividend payout policies.D.in the month of May and for low dividend payout policies.E.in the month of May and for high dividend payout policies.20.The cu

20、rrent market price of a share of AT&T stock is $50. If a call option on this stock has a strike price of $45, the callA.is out of the money.B.is in the money.C.sells for a higher price than if the market price of AT&T stock is $40.D.is out of the money and sells for a higher price than if the market

21、 price of AT&T stock is $40.E.is in the money and sells for a higher price than if the market price of AT&T stock is $40.21.The current market price of a share of Boeing stock is $75. If a call option on this stock has a strike price of $70, the callA.is out of the money.B.is in the money.C.sells fo

22、r a higher price than if the market price of Boeing stock is $70.D.is out of the money and sells for a higher price than if the market price of Boeing stock is $70.E.is in the money and sells for a higher price than if the market price of Boeing stock is $70.22.The current market price of a share of

23、 CSCO stock is $22. If a call option on this stock has a strike price of $20, the callA.is out of the money.B.is in the money.C.sells for a higher price than if the market price of CSCO stock is $21.D.is out of the money and sells for a higher price than if the market price of CSCO stock is $21.E.is

24、 in the money and sells for a higher price than if the market price of CSCO stock is $21.23.The current market price of a share of Disney stock is $30. If a call option on this stock has a strike price of $35, the callA.is out of the money.B.is in the money.C.can be exercised profitably.D.is out of

25、the money and can be exercised profitably.E.is in the money and can be exercised profitably.24.The current market price of a share of CAT stock is $76. If a call option on this stock has a strike price of $76, the callA.is out of the money.B.is in the money.C.is at the money.D.is out of the money an

26、d is at the money.E.is in the money and is at the money.25.The current market price of a share of MOT stock is $24. If a call option on this stock has a strike price of $24, the callA.is out of the money.B.is in the money.C.is at the money.D.is out of the money and is at the money.E.is in the money

27、and is at the money.26.The current market price of a share of IBM stock is $80. If a call option on this stock has a strike price of $80, the callA.is out of the money.B.is in the money.C.is at the money.D.is out of the money and is at the money.E.is in the money and is at the money.27.A put option

28、on a stock is said to be out of the money ifA.the exercise price is higher than the stock price.B.the exercise price is less than the stock price.C.the exercise price is equal to the stock price.D.the price of the put is higher than the price of the call.E.the price of the call is higher than the pr

29、ice of the put.28.A put option on a stock is said to be in the money ifA.the exercise price is higher than the stock price.B.the exercise price is less than the stock price.C.the exercise price is equal to the stock price.D.the price of the put is higher than the price of the call.E.the price of the

30、 call is higher than the price of the put.29.A put option on a stock is said to be at the money ifA.the exercise price is higher than the stock price.B.the exercise price is less than the stock price.C.the exercise price is equal to the stock price.D.the price of the put is higher than the price of

31、the call.E.the price of the call is higher than the price of the put.30.A call option on a stock is said to be out of the money ifA.the exercise price is higher than the stock price.B.the exercise price is less than the stock price.C.the exercise price is equal to the stock price.D.the price of the put is higher than