Quiz 1

1. 1A 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 payoff of the strategy if the market index is $810?

   1. A810
   2. B-810
   3. C20
   4. D830
2. 2A 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?

   1. A36.29 loss
   2. B18.65 gain
   3. C43.76 loss
   4. Dno loss or gain
3. 3A strategy consists of shorting a market index at $830 and longing a call on the index with a strike of $830. If the call premium is $15.00 and interest rates are 0.5% per month, what is the payoff of the strategy if the market index is $850?

   1. A810
   2. B-830
   3. C830
   4. D0
4. 4A strategy consists of shorting a market index at $830 and longing a call on the index with a strike of $830. If the call premium is $15.00 and interest rates are 0.5% per month, what is the profit or loss of the strategy if the market index is $850 in six months?

   1. A9.76 gain
   2. B9.76 loss
   3. C10.24 gain
   4. D10.24 loss
5. 5Which of the following statement regarding the strategy of "floors" is correct?

   1. AIt is long a call option combined with a short position in the underlying asset
   2. BIts goal is to insure against a fall in the price of underlying asset
   3. CIt is long a put option combined with a short position in the underlying asset
   4. DIt is long a call option combined with a long position in the underlying asset
6. 6Which of the following statement regarding the strategy of "caps" is correct?

   1. AIt is short a call option combined with a long position in the underlying asset
   2. BIts goal is to insure against a fall in the price of underlying asset
   3. CIt is long a put option combined with a short position in the underlying asset
   4. DIt is long a call option combined with a short position in the underlying asset
7. 7Which statement is incorrect regarding "covered writing"?

   1. AIt means to sell a call option with a long position in the underlying asset
   2. BThe potential loss to the covered writer is limited
   3. CIt means to sell a call option without any position in the underlying asset
   4. DIf the price of the underlying asset rises above its strike price, the covered writer may generate profit from the strategy

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Business/Economics Quiz on Quiz 1, created by cameron white on 20/02/2018.

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cameron white

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