Investments Ch 15 Pt 1 HW
You write one IBM July 130 call contract for a premium of $5. You hold the option until the expiration date, when IBM stock sells for $132 per share. You will realize a ______ on the investment. $300 profit $200 loss $700 loss $200 profit
$300 profit
Refer to Figure 15.1, which lists the prices of various Facebook options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following Oct-14 expiration options on a single share, assuming that the stock price on the expiration date is $82. (Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.)
a. Call option, X = 75 Payoff = 7 Profit/Loss = 3.05 ± 0.02 b. Put option, X = 75 Payoff = 0 Profit/loss = -3.01 ± 0.02 c. Call option, X = 80 Payoff = 2 Profit/Loss = .35 ± 0.02 d. Put option, X = 80 Payoff = 0 Profit/Loss = -5.72 ± 0.02
The following price quotations are for exchange-listed options on Primo Corporation common stock. Company Strike Expiration Call Put Primo 61.12 56 Feb 7.17 0.49 With transaction costs ignored, how much would a buyer have to pay for one call option contract. Assume each contract is for 100 shares. Amount for one call option:
$ 717
You purchase one Facebook September 165 put contract for a premium of $4.10. What is your maximum possible profit? Assume each contract is for 100 units. Potential profit
$16,090
An investor is bearish on a particular stock and decided to buy a put with a strike price of $25. Ignoring commissions, if the option was purchased for a price of $.85, what is the break-even point for the investor? $24.15 $25 $25.87 $27.86
$24.15
An investor purchases a long call at a price of $2.50. The strike price at expiration is $35. If the current stock price is $35.10, what is the break-even point for the investor? $32.50 $35 $37.50 $37.60
$37.50
You purchase one IBM July 124 call contract for a premium of $11. You hold the option until the expiration date, when IBM stock sells for $131 per share. You will realize a ______ on the investment. $400 profit $400 loss $700 profit $700 loss
$400 loss
An investor buys a call at a price of $4.80 with an exercise price of $43. At what stock price will the investor break even on the purchase of the call? (Round your answer to 2 decimal places.) Break even price
$47.80
Each listed stock option contract gives the holder the right to buy or sell __________ shares of stock. 1 10 100 1,000
100
______ option can only be exercised on the expiration date. A Mexican An Asian An American A European
A European
A call option on Brocklehurst Corp. has an exercise price of $30. The current stock price of Brocklehurst Corp. is $32. The call option is _________. at the money in the money out of the money knocked in
in the money
A put option on Dr. Pepper Snapple Group, Inc., has an exercise price of $45. The current stock price is $41. The put option is _________. at the money in the money out of the money knocked out
in the money
At contract maturity the value of a call option is ___________, where X equals the option's strike price and ST is the stock price at contract expiration. max (0, ST - X) min (0, ST - X) max (0, X - ST) min (0, X - ST)
max (0, ST - X)
At contract maturity the value of a put option is ___________, where X equals the option's strike price and ST is the stock price at contract expiration. max (0, ST - X) min (0, ST - X) max (0, X - ST) min (0, X - ST)
max (0, X - ST)
