Econ 1710 Chapters 18,20,21 Multiple Choice Review - JACK
You purchase one September 50 put contract for a put premium of $2. What is the maximum profit that you could gain from this strategy? A. $4,800 B. $200 C. $5,000 D. $5,200 E. None of these is correct
A. $4,800 −$200 + $5,000 = $4,800 (if the stock falls to zero.)
_________ is equal to (common shareholders' equity/common shares outstanding). A. Book value per share B. Liquidation value per share C. Market value per share D. Tobin's Q E. None of these is correct
A. Book value per share
A protective put strategy is A. a long put plus a long position in the underlying asset. B. a long put plus a long call on the same underlying asset. C. a long call plus a short put on the same underlying asset. D. a long put plus a short call on the same underlying asset. E. None of these is correct.
A. a long put plus a long position in the underlying asset.
An American call option can be exercised A. any time on or before the expiration date. B. only on the expiration date. C. any time in the indefinite future. D. only after dividends are paid. E. None of these is correct.
A. any time on or before the expiration date.
An American put option can be exercised A. any time on or before the expiration date. B. only on the expiration date. C. any time in the indefinite future. D. only after dividends are paid. E. None of these is correct.
A. any time on or before the expiration date.
If the stock price increases, the price of a put option on that stock __________ and that of a call option __________. A. decreases; increases B. decreases; decreases C. increases; decreases D. increases; increases E. does not change; does not change
A. decreases; increases
Other things being equal, a low ________ would be most consistent with a relatively high growth rate of firm earnings and dividends. A. dividend payout ratio B. degree of financial leverage C. variability of earnings D. inflation rate E. None of these is correct
A. dividend payout ratio
At expiration, the time value of an in-the-money call option is always A. equal to zero. B. positive. C. negative. D. equal to the stock price minus the exercise price. E. None of the options
A. equal to zero.
The current market price of a share of Disney stock is $30. If a call option on this stock has a strike price of $35, the call A. is out of the money. B. is in the money. C. can be exercised profitably. D. is out of the money and can be exercised profitably. E. is in the money and can be exercised profitably.
A. is out of the money.
The price that the writer of a put option receives to sell the option is called the A. premium B. exercise price C. execution price D. acquisition price E. strike price
A. premium
The most appropriate discount rate to use when applying a FCFE valuation model is the __________. A. required rate of return on equity B. WACC C. risk-free rate D. required rate of return on equity or risk-free rate depending on the debt level of the firm E. None of these is correct
A. required rate of return on equity
A put option on a stock is said to be in the money if A. the exercise price is higher than the stock price. B. the exercise price is less than the stock price. C. the exercise price is equal to the stock price. D. the price of the put is higher than the price of the call. E. the price of the call is higher than the price of the put.
A. the exercise price is higher than the stock price.
To adjust for stock splits A. the exercise price of the option is reduced by the factor of the split and the number of options held is increased by that factor. B. the exercise price of the option is increased by the factor of the split and the number of options held is reduced by that factor. C. the exercise price of the option is reduced by the factor of the split and the number of options held is reduced by that factor. D. the exercise price of the option is increased by the factor of the split and the number of options held is increased by that factor. E. None of these is correct
A. the exercise price of the option is reduced by the factor of the split and the number of options held is increased by that factor.
The goal of fundamental analysts is to find securities A. whose intrinsic value exceeds market price. B. with a positive present value of growth opportunities. C. with high market capitalization rates. D. All of these are correct. E. None of these is correct.
A. whose intrinsic value exceeds market price.
Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $100. If the risk-free rate is 5%, the stock price is $103, and the put sells for $7.50, what should be the price of the call? A. $17.50 B. $15.26 C. $10.36 D. $12.26 E. None of these is correct.
B. $15.26 C = 103 − [100/(1.05)] + 7.50; C = $15.26.
________ are analysts who use information concerning current and prospective profitability of a firm to assess the firm's fair market value. A. Credit analysts B. Fundamental analysts C. Systems analysts D. Technical analysts E. Specialists
B. Fundamental analysts
Which of the following is the best measure of the floor for a stock price? A. Book value B. Liquidation value C. Replacement cost D. Market value E. Tobin's Q
B. Liquidation value
_______ is the amount of money per common share that could be realized by breaking up the firm, selling the assets, repaying the debt, and distributing the remainder to shareholders. A. Book value per share B. Liquidation value per share C. Market value per share D. Tobin's Q E. None of these is correct
B. Liquidation value per share
If the expected ROE on reinvested earnings is equal to k, the multistage DDM reduces to A. V0= (Expected Dividend Per Share in Year 1)/k B. V0= (Expected EPS in Year 1)/k C. V0= (Treasury Bond Yield in Year 1)/k D. V0= (Market return in Year 1)/k E. None of these is correct
B. V0= (Expected EPS in Year 1)/k If ROE = k, no growth is occurring; b = 0; EPS = DPS
A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index most likely has ________. A. an anticipated earnings growth rate which is less than that of the average firm B. a dividend yield which is less than that of the average firm C. less predictable earnings growth than that of the average firm D. greater cyclicality of earnings growth than that of the average firm E. None of these is correct.
B. a dividend yield which is less than that of the average firm
All else equal, call option values are higher A. in the month of May. B. for low dividend payout policies. C. for high dividend payout policies. D. in the month of May and for low dividend payout policies. E. in the month of May and for high dividend payout policies.
B. for low dividend payout policies.
The _______ is defined as the present value of all cash proceeds to the investor in the stock. A. dividend payout ratio B. intrinsic value C. market capitalization rate D. plowback ratio E. None of these is correct
B. intrinsic value
Historically, P/E ratios have tended to be ________. A. higher when inflation has been high B. lower when inflation has been high C. uncorrelated with inflation rates but correlated with other macroeconomic variables D. uncorrelated with any macroeconomic variables including inflation rates E. None of these is correct
B. lower when inflation has been high
To the option holder, put options are worth ______ when the exercise price is higher; call options are worth ______ when the exercise price is higher. A. more; more B. more; less C. less; more D. less; less E. It doesn't matter - they are too risky to be included in a reasonable person's portfolio.
B. more; less
A European call option can be exercised A. any time in the future. B. only on the expiration date. C. if the price of the underlying asset declines below the exercise price. D. immediately after dividends are paid. E. None of these is correct.
B. only on the expiration date.
A European put option can be exercised A. any time in the future. B. only on the expiration date. C. if the price of the underlying asset declines below the exercise price. D. immediately after dividends are paid. E. None of these is correct.
B. only on the expiration date.
Before expiration, the time value of an in-the-money call option is always A. equal to zero. B. positive. C. negative. D. equal to the stock price minus the exercise price. E. None of the options
B. positive.
A version of earnings management that became common in the 1990s was A. when management makes changes in the operations of the firm to ensure that earnings do not increase or decrease too rapidly. B. reporting "pro forma earnings". C. when management makes changes in the operations of the firm to ensure that earnings do not increase too rapidly. D. when management makes changes in the operations of the firm to ensure that earnings do not decrease too rapidly. E. None of these is correct.
B. reporting "pro forma earnings".
An American put option allows the holder to A. buy the underlying asset at the striking price on or before the expiration date. B. sell the underlying asset at the striking price on or before the expiration date. C. potentially benefit from a stock price increase. D. sell the underlying asset at the striking price on or before the expiration date and potentially benefit from a stock price increase. E. buy the underlying asset at the striking price on or before the expiration date and potentially benefit from a stock price increase.
B. sell the underlying asset at the striking price on or before the expiration date.
Before expiration, the time value of a call option is equal to A. zero. B. the actual call price minus the intrinsic value of the call. C. the intrinsic value of the call. D. the actual call price plus the intrinsic value of the call. E. None of these is correct.
B. the actual call price minus the intrinsic value of the call.
According to the put-call parity theorem, the value of a European put option on a non-dividend paying stock is equal to: A. the call value plus the present value of the exercise price plus the stock price. B. the call value plus the present value of the exercise price minus the stock price. C. the present value of the stock price minus the exercise price minus the call price. D. the present value of the stock price plus the exercise price minus the call price. E. None of these is correct.
B. the call value plus the present value of the exercise price minus the stock price.
The Option Clearing Corporation is owned by A. the Federal Reserve System. B. the exchanges on which stock options are traded. C. the major U. S. banks. D. the Federal Deposit Insurance Corporation. E. None of these is correct.
B. the exchanges on which stock options are traded.
put option on a stock is said to be out of the money if A. the exercise price is higher than the stock price. B. the exercise price is less than the stock price. C. the exercise price is equal to the stock price. D. the price of the put is higher than the price of the call. E. the price of the call is higher than the price of the put.
B. the exercise price is less than the stock price.
For most firms, P/E ratios and risk A. will be directly related. B. will have an inverse relationship. C. will be unrelated. D. will both increase as inflation increases. E. None of these is correct.
B. will have an inverse relationship.
Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $45. If the risk-free rate is 4%, the stock price is $48, and the put sells for $1.50, what should be the price of the call? A. $4.38 B. $5.60 C. $6.23 D. $12.26 E. None of these is correct.
C. $6.23
You purchase one IBM March 100 put contract for a put premium of $6. What is the maximum profit that you could gain from this strategy? A. $10,000 B. $10,600 C. $9,400 D. $9,000 E. None of these is correct
C. $9,400
The present value of growth opportunities (PVGO) is equal to I) the difference between a stock's price and its no-growth value per share. II) the stock's price. III) zero if its return on equity equals the discount rate. IV) the net present value of favorable investment opportunities. A. I and IV B. II and IV C. I, III, and IV D. II, III, and IV E. III and IV
C. I, III, and IV
In the dividend discount model, which of the following are not incorporated into the discount rate? A. Real risk-free rate B. Risk premium for stocks C. Return on assets D. Expected inflation rate E. None of these is correct
C. Return on assets
What happens to an option if the underlying stock has a 2-for-1 split? A. There is no change in either the exercise price or in the number of options held. B. The exercise price will adjust through normal market movements; the number of options will remain the same. C. The exercise price would become half of what it was and the number of options held would double. D. The exercise price would double and the number of options held would double. E. There is no standard rule - each corporation has its own policy.
C. The exercise price would become half of what it was and the number of options held would double.
What happens to an option if the underlying stock has a 3-for-1 split? A. There is no change in either the exercise price or in the number of options held. B. The exercise price will adjust through normal market movements; the number of options will remain the same. C. The exercise price would become one third of what it was and the number of options held would triple. D. The exercise price would triple and the number of options held would triple. E. There is no standard rule - each corporation has its own policy.
C. The exercise price would become one third of what it was and the number of options held would triple.
You purchased one AT&T March 50 call and sold one AT&T March 55 call. Your strategy is known as A. a long straddle. B. a horizontal spread. C. a money spread. D. a short straddle. E. None of these is correct.
C. a money spread.
A callable bond should be priced the same as A. a convertible bond. B. a straight bond plus a put option. C. a straight bond plus a call option. D. a straight bond plus warrants. E. a straight bond.
C. a straight bond plus a call option.
You purchased one AT&T March 50 put and sold one AT&T April 50 put. Your strategy is known as A. a vertical spread. B. a straddle. C. a time spread. D. a collar. E. None of these is correct.
C. a time spread.
Buyers of call options __________ required to post margin deposits and sellers of put options __________ required to post margin deposits. A. are; are not B. are; are C. are not; are D. are not; are not E. are always; are sometimes
C. are not; are
All else equal, call option values are lower A. in the month of May. B. for low dividend payout policies. C. for high dividend payout policies. D. in the month of May and for low dividend payout policies. E. in the month of May and for high dividend payout policies.
C. for high dividend payout policies.
Dividend discount models and P/E ratios are used by __________ to try to find mispriced securities. A. technical analysts B. statistical analysts C. fundamental analysts D. dividend analysts E. psychoanalysts
C. fundamental analysts
High P/E ratios tend to indicate that a company will ______, ceteris paribus. A. grow quickly B. grow at the same speed as the average company C. grow slowly D. not grow E. None of these is correct
C. grow slowly
Low P/E ratios tend to indicate that a company will ______, ceteris paribus. A. grow quickly B. grow at the same speed as the average company C. grow slowly D. P/E ratios are unrelated to growth E. None of these is correct
C. grow slowly
The dividend discount model A. ignores capital gains. B. incorporates the after-tax value of capital gains. C. includes capital gains implicitly. D. restricts capital gains to a minimum. E. None of these is correct.
C. includes capital gains implicitly.
Suppose the price of a share of Google stock is $500. An April call option on Google stock has a premium of $5 and an exercise price of $500. Ignoring commissions, the holder of the call option will earn a profit if the price of the share A. increases to $504. B. decreases to $490. C. increases to $506. D. decreases to $496. E. None of these is correct.
C. increases to $506.
If the stock price decreases, the price of a put option on that stock __________ and that of a call option __________. A. decreases; increases B. decreases; decreases C. increases; decreases D. increases; increases E. does not change; does not change
C. increases; decreases
The current market price of a share of CAT stock is $76. If a call option on this stock has a strike price of $76, the call A. is out of the money. B. is in the money. C. is at the money. D. is out of the money and is at the money. E. is in the money and is at the money.
C. is at the money.
The current market price of a share of MOT stock is $24. If a call option on this stock has a strike price of $24, the call A. is out of the money. B. is in the money. C. is at the money. D. is out of the money and is at the money. E. is in the money and is at the money.
C. is at the money.
The ______ is a common term for the market consensus value of the required return on a stock. A. dividend payout ratio B. intrinsic value C. market capitalization rate D. plowback rate E. None of these is correct
C. market capitalization rate
Before expiration, the time value of an in-the-money put option is always A. equal to zero. B. negative. C. positive. D. equal to the stock price minus the exercise price. E. None of the options
C. positive.
Since 1955, Treasury bond yields and earnings yields on stocks were _______. A. identical B. negatively correlated C. positively correlated D. uncorrelated
C. positively correlated
Prior to expiration A. the intrinsic value of a call option is greater than its actual value. B. the intrinsic value of a call option is always positive. C. the actual value of a call option is greater than the intrinsic value. D. the intrinsic value of a call option is always greater than its time value.
C. the actual value of a call option is greater than the intrinsic value.
If a firm has a required rate of return equal to the ROE A. the firm can increase market price and P/E by retaining more earnings. B. the firm can increase market price and P/E by increasing the growth rate. C. the amount of earnings retained by the firm does not affect market price or the P/E. D. the firm can increase market price and P/E by retaining more earnings and the firm can increase market price and P/E by increasing the growth rate. E. None of these is correct.
C. the amount of earnings retained by the firm does not affect market price or the P/E.
The maximum loss a buyer of a stock call option can suffer is equal to A. the striking price minus the stock price. B. the stock price minus the value of the call. C. the call premium. D. the stock price. E. None of these is correct.
C. the call premium.
One of the problems with attempting to forecast stock market values is that A. there are no variables that seem to predict market return. B. the earnings multiplier approach can only be used at the firm level. C. the level of uncertainty surrounding the forecast will always be quite high. D. dividend payout ratios are highly variable. E. None of these is correct.
C. the level of uncertainty surrounding the forecast will always be quite high.
he maximum loss a buyer of a stock put option can suffer is equal to A. the striking price minus the stock price. B. the stock price minus the value of the call. C. the put premium. D. the stock price. E. None of these is correct.
C. the put premium.
The value of a stock put option is positively related to the following factors except A. the time to expiration. B. the striking price. C. the stock price. D. All of these are correct. E. None of these is correct.
C. the stock price.
Investors want high plowback ratios A. for all firms. B. whenever ROE > k. C. whenever k > ROE. D. only when they are in low tax brackets. E. whenever bank interest rates are high.
C. whenever k > ROE.
Top Flight Stock currently sells for $53. A one-year call option with strike price of $58 sells for $10, and the risk free interest rate is 5.5%. What is the price of a one-year put with strike price of $58? A. $10.00 B. $12.12 C. $16.00 D. $11.97 E. $14.13
D. $11.97 P = 10 − 53 + 58/(1.055); P = 11.97
You purchase one June 70 put contract for a put premium of $4. What is the maximum profit that you could gain from this strategy? A. $7,000 B. $400 C. $7,400 D. $6,600 E. None of these is correct
D. $6,600 −$400 + $7,000 = $6,600 (if the stock falls to zero.)
The put-call parity theorem A. represents the proper relationship between put and call prices. B. allows for arbitrage opportunities if violated. C. may be violated by small amounts, but not enough to earn arbitrage profits, once transaction costs are considered. D. All of these are correct. E. None of these is correct.
D. All of these are correct.
Suppose that you purchased a call option on the S&P 100 index. The option has an exercise price of 680 and the index is now at 720. What will happen when you exercise the option? A. You will have to pay $680.B. You will receive $720.C. You will receive $680.D. You will receive $4,000.E. You will have to pay $4,000.
D. You will receive $4,000.
A collar with a net outlay of approximately zero is an options strategy that A. combines a put and a call to lock in a price range for a security. B. uses the gains from sale of a call to purchase a put. C. uses the gains from sale of a put to purchase a call. D. combines a put and a call to lock in a price range for a security and uses the gains from sale of a call to purchase a put. E. combines a put and a call to lock in a price range for a security and uses the gains from sale of a put to purchase a call.
D. combines a put and a call to lock in a price range for a security and uses the gains from sale of a call to purchase a put.
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 _______. A. increase; increase B. decrease; increase C. increase; decrease D. decrease; decrease E. cannot tell without further information
D. decrease; decrease
If a firm follows a low-investment-rate plan (applies a low plowback ratio), its dividends will be _______ now and _______ in the future than a firm that follows a high-reinvestment-rate plan. A. higher, higher B. lower, lower C. lower, higher D. higher, lower E. It is not possible to tell.
D. higher, lower
The Gordon model A. is a generalization of the perpetuity formula to cover the case of a growing perpetuity. B. is valid only when g is less than k. C. is valid only when k is less than g. D. is a generalization of the perpetuity formula to cover the case of a growing perpetuity and is valid only when g is less than k. E. is a generalization of the perpetuity formula to cover the case of a growing perpetuity and is valid only when k is less than g.
D. is a generalization of the perpetuity formula to cover the case of a growing perpetuity and is valid only when g is less than k.
The lower bound on the market price of a convertible bond is A. its straight bond value. B. its crooked bond value. C. its conversion value. D. its straight bond value and its conversion value. E. None of these is correct
D. its straight bond value and its conversion value.
A European put option allows the holder to A. buy the underlying asset at the striking price on or before the expiration date. B. sell the underlying asset at the striking price on or before the expiration date. C. potentially benefit from a stock price increase. D. sell the underlying asset at the striking price on the expiration date. E. potentially benefit from a stock price increase and sell the underlying asset at the striking price on the expiration date.
D. sell the underlying asset at the striking price on the expiration date.
The price that the writer of a call option receives for the underlying asset if the buyer executes her option is called the A. strike price B. exercise price C. execution price D. strike price or exercise price E. strike price or execution price
D. strike price or exercise price
The most popular approach to forecasting the overall stock market is to use A. the dividend multiplier. B. the aggregate return on assets. C. the historical ratio of book value to market value. D. the aggregate earnings multiplier. E. Tobin's Q.
D. the aggregate earnings multiplier.
All of the following factors affect the price of a stock option except A. the risk-free rate. B. the riskiness of the stock. C. the time to expiration. D. the expected rate of return on the stock. E. None of these is correct.
D. the expected rate of return on the stock.
According to Peter Lynch, a rough rule of thumb for security analysis is that A. the growth rate should be equal to the plowback rate. B. the growth rate should be equal to the dividend payout rate. C. the growth rate should be low for emerging industries. D. the growth rate should be equal to the P/E ratio. E. None of these is correct.
D. the growth rate should be equal to the P/E ratio.
Earnings management is A. when management makes changes in the operations of the firm to ensure that earnings do not increase or decrease too rapidly. B. when management makes changes in the operations of the firm to ensure that earnings do not increase too rapidly. C. when management makes changes in the operations of the firm to ensure that earnings do not decrease too rapidly. D. the practice of using flexible accounting rules to improve the apparent profitability of the firm. E. None of these is correct.
D. the practice of using flexible accounting rules to improve the apparent profitability of the firm.
A covered call position is A. the simultaneous purchase of the call and the underlying asset. B. the purchase of a share of stock with a simultaneous sale of a put on that stock. C. the short sale of a share of stock with a simultaneous sale of a call on that stock. D. the purchase of a share of stock with a simultaneous sale of a call on that stock. E. the simultaneous purchase of a call and sale of a put on the same stock.
D. the purchase of a share of stock with a simultaneous sale of a call on that stock.
The price that the writer of a put option receives for the underlying asset if the option is exercised is called the A. strike price B. exercise price C. execution price D. strike price or exercise price E. None of these is correct
D. the strike price or the exercise price
Derivative securities are also called contingent claims because A. their owners may choose whether or not to exercise them. B. a large contingent of investors holds them. C. the writers may choose whether or not to exercise them. D. their payoffs depend on the prices of other assets. E. contingency management is used in adding them to portfolios.
D. their payoffs depend on the prices of other assets.
ING Stock currently sells for $38. A one-year call option with strike price of $45 sells for $9, and the risk free interest rate is 4%. What is the price of a one-year put with strike price of $45? A. $9.00 B. $12.89 C. $16.00 D. $18.72 E. $14.26 P = 9 − 38 + 45/(1.04); P = 14.26
E. $14.26
Who popularized the dividend discount model, which is sometimes referred to by his name? A. Burton Malkiel B. Frederick Macaulay C. Harry Markowitz D. Marshall Blume E. Myron Gordon
E. Myron Gordon
A call option has an intrinsic value of zero if the option is A. at the money. B. out of the money. C. in the money. D. at the money and in the money. E. at the money and out of the money.
E. at the money and out of the money.
An American call option allows the buyer to A. sell the underlying asset at the exercise price on or before the expiration date. B. buy the underlying asset at the exercise price on or before the expiration date. C. sell the option in the open market prior to expiration. D. sell the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expiration. E. buy the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expiration.
E. buy the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expiration.
Some more "traditional" assets have option-like features; some of these instruments include A. callable bonds. B. convertible bonds. C. warrants. D. callable bonds and convertible bonds. E. callable bonds, convertible bonds, and warrants.
E. callable bonds, convertible bonds, and warrants.
Because the DDM requires multiple estimates, investors should A. carefully examine inputs to the model. B. perform sensitivity analysis on price estimates. C. not use this model without expert assistance. D. feel confident that DDM estimates are correct. E. carefully examine inputs to the model and perform sensitivity analysis on price estimates.
E. carefully examine inputs to the model and perform sensitivity analysis on price estimates.
The current market price of a share of AT&T stock is $50. If a call option on this stock has a strike price of $45, the call A. is out of the money. B. is in the money. C. sells for a higher price than if the market price of AT&T stock is $40. D. is out of the money and sells for a higher price than if the market price of AT&T stock is $40. E. is in the money and sells for a higher price than if the market price of AT&T stock is $40.
E. is in the money and sells for a higher price than if the market price of AT&T stock is $40.
The current market price of a share of Boeing stock is $75. If a call option on this stock has a strike price of $70, the call A. is out of the money. B. is in the money. C. sells for a higher price than if the market price of Boeing stock is $70. D. is out of the money and sells for a higher price than if the market price of Boeing stock is $70. E. is in the money and sells for a higher price than if the market price of Boeing stock is $70.
E. is in the money and sells for a higher price than if the market price of Boeing stock is $70.
The current market price of a share of CSCO stock is $22. If a call option on this stock has a strike price of $20, the call A. is out of the money. B. is in the money. C. sells for a higher price than if the market price of CSCO stock is $21. D. is out of the money and sells for a higher price than if the market price of CSCO stock is $21. E. is in the money and sells for a higher price than if the market price of CSCO stock is $21.
E. is in the money and sells for a higher price than if the market price of CSCO stock is $21.
The price that the buyer of a call option pays to acquire the option is called the A. strike price B. exercise price C. execution price D. acquisition price E. premium
E. premium
The price that the buyer of a put option pays to acquire the option is called the A. strike price B. exercise price C. execution price D. acquisition price E. premium
E. premium
The price that the writer of a call option receives to sell the option is called the A. strike price B. exercise price C. execution price D. acquisition price E. premium
E. premium
The _________ is the fraction of earnings reinvested in the firm. A. dividend payout ratio B. retention rate C. plowback ratio D. dividend payout ratio and plowback ratio E. retention rate and plowback ratio
E. retention rate and plowback ratio
A European call option allows the buyer to A. sell the underlying asset at the exercise price on the expiration date. B. buy the underlying asset at the exercise price on or before the expiration date. C. sell the option in the open market prior to expiration. D. buy the underlying asset at the exercise price on the expiration date. E. sell the option in the open market prior to expiration and buy the underlying asset at the exercise price on the expiration date.
E. sell the option in the open market prior to expiration and buy the underlying asset at the exercise price on the expiration date.
The price that the buyer of a call option pays for the underlying asset if she executes her option is called the A. strike price B. exercise price C. execution price D. strike price or execution price E. strike price or exercise price
E. strike price or exercise price
The price that the buyer of a put option receives for the underlying asset if she executes her option is called the A. strike price B. exercise price C. execution price D. strike price or execution price E. strike price or exercise price
E. strike price or exercise price
Which of the following factors affect the price of a stock option A. the risk-free rate. B. the riskiness of the stock. C. the time to expiration. D. the expected rate of return on the stock. E. the risk-free rate, the riskiness of the stock, and the time to expiration.
E. the risk-free rate, the riskiness of the stock, and the time to expiration.
The value of a stock put option is positively related to A. the time to expiration. B. the striking price. C. the stock price. D. all listed answers. E. the time to expiration and the striking price.
E. the time to expiration and the striking price.
