chapter 3

Question 1 of 14

Medal-premium 1

A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, what is the profit or loss at expiration (in 6 months) if the market index is $810?

Select one of the following:

  • $20.00 gain

  • $18.65 gain

  • $36.29 loss

  • $43.76 loss

Question 2 of 14

Medal-premium 1

A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, compute the profit or loss from the long index position by itself expiration (in 6 months) if the market index is $810.

Select one of the following:

  • $45.21 loss

  • $21.22 loss

  • $18.00 gain

  • $24.25 gain

Question 3 of 14

Medal-premium 1

A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, compute the profit or loss from the long put position by itself (in 6 months) if the market index is $810.

Select one of the following:

  • $3.45 gain

  • $1.45 gain

  • $2.80 loss

  • $1.36 loss

Question 4 of 14

Medal-premium 1

A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, what is the estimated price of a call option with an exercise price of $830?

Select one of the following:

  • $42.47

  • $45.26

  • $47.67

  • $49.55

Question 5 of 14

Medal-premium 1

A strategy consists of longing a put on the market index with a strike of 830 and shorting a call option on the market index with a strike price of 830. The put premium is $18.00 and the call premium is $44.00. Interest rates are 0.5% per month. Determine the net profit or loss if the index price at expiration is $830 (in 6 months).

Select one of the following:

  • $0

  • $23.67 loss

  • $26.79 gain

  • $28.50 gain

Question 6 of 14

Medal-premium 1

A strategy consists of longing a put on the market index with a strike of 830 and shorting a call option on the market index with a strike price of 830. The put premium is $18.00 and the call premium is $44.00. Interest rates are 0.5% per month. What is the breakeven price of the market index for this strategy at expiration (in 6 months)?

Select one of the following:

  • $802.12

  • $830.00

  • $855.21

  • $866.32

Question 7 of 14

Medal-premium 1

At the 6-month point, what is the breakeven index price for a strategy of longing the market index at a price of 830? Interest rates are 0.5% per month.

Select one of the following:

  • $802.12

  • $830.00

  • $855.21

  • $866.32

Question 8 of 14

Medal-premium 1

The $850 strike put premium is $25.45 and the $850 strike call is selling for $30.51. Calculate the breakeven index price for a strategy employing a short call and long put that expires in 6 months. Interest rates are 0.5% per month.

Select one of the following:

  • $822.67

  • $824.79

  • $830.76

  • $875.82

Question 9 of 14

Medal-premium 1

What is the maximum profit that an investor can obtain from a strategy employing a long 830 call and a short 850 call over 6 months? Interest rates are 0.5% per month.

Select one of the following:

  • $6.80

  • $7.68

  • $9.24

  • $12.32

Question 10 of 14

Medal-premium 1

What is the maximum loss that an investor can obtain over 6 months from a strategy employing a long 830 call and a short 850 call? Interest rates are 0.5% per month.

Select one of the following:

  • $6.80

  • $7.68

  • $9.24

  • $12.32

Question 11 of 14

Medal-premium 1

What is the breakeven point that an investor can obtain from a 6-month strategy employing a long 830 call and a short 850 call? Interest rates are 0.5% per month.

Select one of the following:

  • $832.82

  • $842.32

  • $852.22

  • $862.92

Question 12 of 14

Medal-premium 1

The owner of a house worth $180,000 purchases an insurance policy at the beginning of the year for a price of $1,000. The deductible on the policy is $5,000. If after 6 months the homeowner experiences a casualty loss valued at $45,000, what is the homeowner's net gain/loss? Assume an opportunity cost of capital of 4.0% annually.

Select one of the following:

  • $0

  • $1,000

  • $5,000

  • $6,020

Question 13 of 14

Medal-premium 1

Using option strategy concepts, what is the value of an insured home, if the value of the uninsured home is $220,000, the house was purchased for $180,000 and the house has a casualty policy costing $500 with a $2,000 deductible? Ignore interest costs.

Select one of the following:

  • $180,000

  • $217,500

  • $220,000

  • $222,500

Question 14 of 14

Medal-premium 1

An investor purchases a call option with an exercise price of $55 for $2.60. The same investor sells a call on the same security with an exercise price of $60 for $1.40. At expiration, 3 months later, the stock price is $56.75. All other things being equal and given an annual interest rate of 4.0%, what is the net profit or loss to the investor?

Select one of the following:

  • $1.21 loss

  • $1.50 loss

  • $0.54 gain

  • $1.65 gain

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Beatriz Peregrina Viñolo
Quiz by , created about 2 years ago

Quiz on chapter 3, created by Beatriz Peregrina Viñolo on 26/11/2014.

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Beatriz Peregrina Viñolo
Created by Beatriz Peregrina Viñolo about 2 years ago
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