Derivatives

Question 1

State the how much the following put option is in or out of the money.

Exercise price $25, current price $22, price of put $3.

Answer 1

$3 in the money.

Question 2

True or false: The buyer in a credit default swap makes periodic payments to the protection seller.

Answer 2

True

Question 3

True or false: The buyer in a credit default swap is taking on credit risk in return for periodic payments from the other party.

Answer 3

False