Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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A
writer of an American put option may be required by the holder to: a. | Sell the
security on or before the exercise date | c. | Sell the security at the exercise
date | b. | Buy the security
on or before the exercise date | d. | Buy the security
at the exercise date | | | | |
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2.
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A
call option on an equity share will increase in value a. | If the actual
share price rises or the exercise price rises | c. | If the actual price rises or the exercise price
falls | b. | If the actual share price falls or the exercise price
falls | d. | If the actual
share price falls or the exercise price rises | | | | |
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3.
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The
actual share price is 220p and the exercise price on a 90 day call option is 200p. The premium
on the call is 30p and the risk free rate is five per cent per annum. The value of a 90 day put
with the same exercise price and exercise date would be:
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4.
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A
security is currently trading at 150p. In 6 months it will either stand at 100p or 200p.
What is the value of a call option against this security? The risk free rate is 5 per
cent. a. | 26.23 | c. | 27.44 | b. | 25 | d. | 101.23 | | | | |
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5.
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A
security is currently trading at 150p. In 6 months it will either stand at 100p or 200p.
What is the hedge ratio?
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