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?
Answer
$20.00 gain
$18.65 gain
$36.29 loss
$43.76 loss
Question 2
Question
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.
Answer
$45.21 loss
$21.22 loss
$18.00 gain
$24.25 gain
Question 3
Question
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.
Answer
$3.45 gain
$1.45 gain
$2.80 loss
$1.36 loss
Question 4
Question
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?
Answer
$42.47
$45.26
$47.67
$49.55
Question 5
Question
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).
Answer
$0
$23.67 loss
$26.79 gain
$28.50 gain
Question 6
Question
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)?
Answer
$802.12
$830.00
$855.21
$866.32
Question 7
Question
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.
Answer
$802.12
$830.00
$855.21
$866.32
Question 8
Question
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.
Answer
$822.67
$824.79
$830.76
$875.82
Question 9
Question
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.
Answer
$6.80
$7.68
$9.24
$12.32
Question 10
Question
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.
Answer
$6.80
$7.68
$9.24
$12.32
Question 11
Question
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.
Answer
$832.82
$842.32
$852.22
$862.92
Question 12
Question
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.
Answer
$0
$1,000
$5,000
$6,020
Question 13
Question
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.
Answer
$180,000
$217,500
$220,000
$222,500
Question 14
Question
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?