financial options and applications in corporate finance

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Types of option markets do not include

Types of option markets do not include
  • A. European option
  • B. American option
  • C. expiry option
  • D. covered options
  • Correct Answer: Option C

Present value of portfolio is $900 and current value of stock in portfolio is $1500 then current option price would be

Present value of portfolio is $900 and current value of stock in portfolio is $1500 then current option price would be
  • A. $2,400
  • B. −$600
  • C. −$2400
  • D. $600
  • Correct Answer: Option D

According to Black Scholes model, selling and buying of stock have

According to Black Scholes model, selling and buying of stock have
  • A. discount rate
  • B. transaction costs
  • C. no transaction costs
  • D. no discounts
  • Correct Answer: Option B

Type of options in which buyer of options has call on 200 shares in stock is classified as

Type of options in which buyer of options has call on 200 shares in stock is classified as
  • A. call option
  • B. stated option
  • C. unstated option
  • D. contractual option
  • Correct Answer: Option A

Call options situation in which strike price is greater than current price of stock is classified as

Call options situation in which strike price is greater than current price of stock is classified as
  • A. out-of-the-portfolio
  • B. in-the-portfolio
  • C. in-the-money
  • D. out-of-the-money
  • Correct Answer: Option D

Current value of stock in portfolio with current option price $20 is $50, then present value of portfolio would be

Current value of stock in portfolio with current option price $20 is $50, then present value of portfolio would be
  • A. $30
  • B. $70
  • C. 1.67%
  • D. 30%
  • Correct Answer: Option A

In binomial approach of option pricing model, fourth step is to create

In binomial approach of option pricing model, fourth step is to create
  • A. equalize domain of payoff
  • B. equalize ending price
  • C. riskless investment
  • D. high risky investment
  • Correct Answer: Option C

Current option is $800 and current value of stock in portfolio is $1900 then present value of portfolio would be

Current option is $800 and current value of stock in portfolio is $1900 then present value of portfolio would be
  • A. −$1100
  • B. $2,700
  • C. $1,100
  • D. −$2700
  • Correct Answer: Option C

According to Black Scholes model, short term seller receives today price which

According to Black Scholes model, short term seller receives today price which
  • A. short term cash proceeds
  • B. proceeds in cheques
  • C. full cash proceeds
  • D. zero proceeds
  • Correct Answer: Option C

Current option is $700 and current value of stock in portfolio is $1400 then present value of portfolio will be

Current option is $700 and current value of stock in portfolio is $1400 then present value of portfolio will be
  • A. −$700
  • B. $2,100
  • C. $700
  • D. 2%
  • Correct Answer: Option C

In an option pricing, a rises in risk free rate results in option’s value

In an option pricing, a rises in risk free rate results in option’s value
  • A. slight time decreases
  • B. slight increases
  • C. slight decreases
  • D. slight time increases
  • Correct Answer: Option B

Greater value of option, larger span of time value is usually results in

Greater value of option, larger span of time value is usually results in
  • A. shorter call option
  • B. longer call option
  • C. longer put option
  • D. shorter put option
  • Correct Answer: Option B

According to Black Scholes model, rate which is constant and known is classified as

According to Black Scholes model, rate which is constant and known is classified as
  • A. short term return rate
  • B. long term return rate
  • C. risk free interest rate
  • D. risky rate of return
  • Correct Answer: Option C

Long-term equity anticipation security is usually classified as

Long-term equity anticipation security is usually classified as
  • A. short-term options
  • B. long-term options
  • C. short money options
  • D. yearly call
  • Correct Answer: Option B

Market value of option which is out-of-money is

Market value of option which is out-of-money is
  • A. greater than zero
  • B. equal to zero
  • C. lesser than zero
  • D. equal to one
  • Correct Answer: Option A

In financial planning, a higher strike price leads to call option

In financial planning, a higher strike price leads to call option
  • A. price is higher
  • B. rate is lower
  • C. price is lower
  • D. rate is higher
  • Correct Answer: Option C

In option pricing, an increasing in option price due to

In option pricing, an increasing in option price due to
  • A. time of expiry increases
  • B. time of expiry decreases
  • C. exchange time increases
  • D. exchange time decreases
  • Correct Answer: Option A

Current value of stock including in portfolio is subtracted from present value of portfolio to calculate

Current value of stock including in portfolio is subtracted from present value of portfolio to calculate
  • A. last month option price
  • B. last year option price
  • C. current option price
  • D. future option price
  • Correct Answer: Option C

At last day when European and American option can be exercised is classified as

At last day when European and American option can be exercised is classified as
  • A. European date
  • B. American date
  • C. expiration date
  • D. money date
  • Correct Answer: Option C

Value of stock is $250 and call option obligation is $100 then current value of portfolio would be

Value of stock is $250 and call option obligation is $100 then current value of portfolio would be
  • A. 0.35 times
  • B. $150
  • C. $350
  • D. $2.50
  • Correct Answer: Option B
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