Exam of Beloy (3rd) Flashcards
A contract giving the owner the right to buy or sell an asset at a fixed price for a given period of time is
AN OPTION
A European call option can be exercised
ONLY ON THE EXPIRATION DATE
A European put option allows the holder to
SELL THE UNDERLYING ASSET AT THE STRIKING PRICE ON THE EXPIRATION DATE
Lookback options have payoffs that
DEPEND IN THE PART ON THE MINIMUM OR MAIMUM PROCE OF THE UNDERLYING ASSET
A derivative is a financial instrument whose value is determined by
AN UNDERLYING SECURITY
Which contract is an option?
BOTH CALL AND PUT
Derivatives are used by corporations as a useful tool for managing certain aspects of the firm’s risk.
TRUE
The owner of a put option has
THE RIGHT BUT NOT THE ONLIGATIONTO SELLANASSET AT A GIVEN PRICE
A call option on a stock is said to be out of the money if
THE EXERCISE PRICE IS HIGHER THAN THE STOCK PRICE
Ms. Co currently own a put option on Stock A with a strike price of P45. If the current price of Stock A is P40, then what is the in-the-money amount of the option?
-5
To the option holder, put options are worth ______ when the exercise price is higher; call options are worth ______ when the exercise price is higher.
MORE;LESS
The value of a stock put option is positively related to the following factors except
THE STOCK PRICE
The price that the buyer of a call option pays for the underlying asset if she executes her option is called the
STRIKE OR EXERCISE PRICE
A covered call position is
THE PURCHASE OF A SHARE OF A SROCK WITH A SIMULTANEOUS SALE OF A CALL OON THE STOCK
Options, forwards, swaps, and futures are financial assets.
FALSE
The owner of a call option has
THE RIGHT BUTNOT THE OBLIGATION TO BUY AN ASSET
A seller of a put option on a futures contract obligates them to buy a futures contract should the put buyer exercise the option.
TRUE
Buyers of call options __________ required to post margin deposits, and sellers of put options __________required to post margin deposits.
ARE ;ARE
Futures contracts are slower to absorb new information than forward contracts.
FALSE
Forward contracts are traded through an organized and regulated exchange rather than being negotiated directly between two parties.
TRUE
An American put option can be exercised
ANYTIME ON OR BEORE THE EXPIRATION DATE
Buyers of put options anticipate the value of the underlying asset will _______, and sellers of call options anticipate the value of the underlying asset will _____.
DECREASE; DECREASE
An American put option allows the holder to
SELL THE UNDERLYING ASSET AT THE STRIKING PRICE ON OR BEFORE THE EX.
A put option on a stock is said to be in the money if
THE EXERCISE PRICE IS HIGHER THAN THE STOCK PRICE
Under the put option, as the price of the stock decreases, the value of the put option increases.
TRUE
The strike price is the price at which the holder of a call option can buy a specified amount of stock at the option’s expiration date.
TRUE
A contract between two parties to buy or sell an asset at a certain time in future for certain price is known as
FORWARD CONTRACT
Put option gives the holder the right to buy the underlying asset at a certain price (exercise price or strike price) within a specific period of time.
FALSE
A contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price is known as:
FUTURE CONTRACT
A call option on a stock is said to be in the money if
the exercise price is less than the stock price.
A put option on a stock is said to be out of the money if
THE EXERCISE PRICE IS LESS THAN THE STOCK PRICE
The current market price of a share of a stock is Php80. If a put option on this stock has a strike price of Php75, the put
IS OUT OF THE MONEY
A call option on a stock is said to be at the money if THE EXERCISE PRICE IS LESS THAN THE STICK PRICE
the exercise price is equal to the stock price.
Put options gives the holder the right to buy an asset at a certain price within a specific period of time.
FALSE
A put option on a stock is said to be at the money if
THE EXERCISE PRICE IS EQUAL TO THE STOCK PRICE
The current market price of a share of JNJ stock is Php60. If a put option on this stock has a strike price of Php55, the put
IS OUT OF THE MONEY AND SELS FOR A LOWER PROCE THA IF THE MARKET PRICE IS 50
The option buyer who expects a stock price to decline will purchase a put option.
TRUE
Options contracts contrast with futures contracts because
DEPEND IN PART ON THE MINIMUM OR MAXIMUM PRICE OF THE UNDERLYING ASSET DURING THE LIFE OF THE OPTION
An American call option can be exercised
ANYTIME ON OR BEFORE THE EXPIRATION DATE
The current market price of a share of a stock is Php20. If a put option on this stock has a strike price of Php18, the put
IS OUT OF THE MONEY
