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The option that gives the owner the right to buy an asset at a fixed price at or before a certain date is called

The option that gives the owner the right to buy an asset at a fixed price at or before a certain date is called a

a.put option

b.call option

c.parity option

d.swaption

2.The price at which the owner of an option can buy or sell the underlying asset is called the

a.market price

b.liquidation value

c.strike price

d.intrinsic value

3.An option that gives the owner the right to buy or sell an asset at a fixed price only on the expiration date, is called a(n)

a.European option

b.American option

c.Asian option

d.exotic option

4.According to the Black and Scholes option pricing model, which of the following will lead to an increase in the value of a call option?

a.the price of the underlying asset decreases

b.the risk free rate increases

c.the time to expiration decreases

d.none of the above

5.When a call option’s strike price is less than the current price of the underlying asset, the call is said to be

a.at the money

b.in the money

c.out of the money

d.worthless

6.Smith Enterprises stock currently sells for $17.50. A call option on the stock has a strike price of $15 and currently sells at $4.50. What is the intrinsic value of the option?

a.$0

b.$2.50

c.$4.50

d.$1.25

7.Smith Enterprises stock currently sells for $17.50. A put option on the stock has a strike price of $15 and currently sells at $4.50. What is the intrinsic value of the option?

a.$0

b.$2.50

c.$4.50

d.$1.25

8.Smith Enterprises stock currently sells for $17.50. A put option on the stock has a strike price of $15 and currently sells at $4.50. What is the time value of the option?

a.$0

b.$2.50

c.$4.50

d.$2.00

9.Smith Enterprises stock currently sells for $17.50. A call option on the stock has a strike price of $15 and currently sells at $4.50. What is the time value of the option?

a.$2.50

b.$0

c.$2.00

d.$4.50

10.Smith Enterprises stock currently sells for $17.50. A call option on the stock has a strike price of $20 and currently sells at $4.50. What is the intrinsic value of the option?

a.$0

b.$2.50

c.$2.00

d.$4.50

Feb 13 2020 View more View Less

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