Unit 4 Series 65

Exercise of which of the following would not result in the money going to the issuer? a) A call option b) rights c) Convertible preferred stock d) Warrants

A

The term used to describe investment vehicles whose value is based on an underlying asset is a) derivative b) separate account c) parity d) funded debt

A

A commodities speculator purchases a 1,000 bushel wheat futures contract at $.50 per bushel. At expiration, the settlement price is $.45 per bushel. The individual a) has a $50 gain b) has a $50 loss c) must make delivery of the wheat d) effectively hedged the long wheat position

B

An investor who was sure that a stock's price was going to move substantially but wasn't sure in which direction would be able to benefit by a) selling the stock short and purchasing a call on the stock b) purchasing a straddle on that stock c) purchasing the stock and a put on the stock d) writing a straddle on that stock

B

The term sweetener would most often apply to a) convertibles b) derivatives c) rights d) warrants

C

One of the privileges frequently offered to holders of common stock is a) preemptive rights b) put options c) warrants d) call options

A

You have a client who has sold short 100 shares of RIF, a stock listed on the NYSE. If the client wishes to use options to protect against unlimited loss, you would suggest the client a) buy 1 RIF call b) sell 1 RIF put c) sell 1 RIF call d) buy 1 RIF put

A

Options positions can either create rights or obligations. In which option position has the investor created the possible obligation to purchase stock? a) purchasing a put b) selling a put c) purchasing a call d) selling a call

B

Many investors with a long position in common stock employ the techniques of writing call options on the underlying stock for the purpose of a) protecting the premium b) participating in the growth of the company c) generating income d) increasing the dividend return

C

Which of the following statements is most accurate when describing equity straddle options? I. The option buyer is looking for market volatility II. The option buyer is looking for market stability III. The option seller is looking for market volatility IV. The option seller is looking for market stability a) II and III b) II and IV c) I and IV d) I and III

C

Buying a put option on a security one currently owns allows an investor to a) increase his profit if the security declines in price b) buy more stock if he exercises the put c) receive the premium for the purchase of the put d) participate in additional gains if the security continues to increase in price

D

In general, the value of a derivative is primarily determined by I. the price volatility of the underlying asset II. the exchange on which it is traded III. the length of time until the contract expires IV. Whether it is purchased from a broker or a dealer a) III and IV b) I and II c) II and III d) I and III

D

Which of the following statements is true? a) a futures contract does not involve obligations to buy or sell an asset b) a futures contract has standardized terms c) a futures contract always requires delivery of an asset d) unlike forwards, futures are not traded on an exchange

B

Which of the following is not traded on any exchange? a) futures contracts b) ETFs c) closed-end funds d) forward contracts

D