447 Chapter 9 & 10 Quizzes

The price of a stock, which pays no dividends, is $30 and the strike price of a one year European call option on the stock is $25. The risk-free rate is 4% (continuously compounded). Which of the following is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound?

$5.98

A warrant is an option that is issued by _______.

A corporation or financial institution

A naked option is an option that is not combined with ____

A offsetting position in the underlying security

An investor has exchange-traded put options to sell 100 shares for $20. There is a 2 for 1 stock split. Which of the following is the position of the investor after the stock split?

Put options to sell 200 shares for $10

Which of the following is the put-call parity result for a non-dividend-paying stock?

The European put price plus the stock price must equal the European call price plus the present value of the strike price

The upper bound for a European put option is the ______

discounted strike price

A call option with the exercise price of $45, when stock price is $50, the option is _______.

in the money

A put option in which the stock price is $60 and the exercise price is $65 is said to be

in-the-money

The value of an option at expiration is its _______.

intrinsic value

The upper bound for a call option is the _______.

stock price