[Solved] Assignment 219492

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Subject: Business    / Finance
Question
Question 1 (2.5 points)
Question 1 UnsavedOne reason for writing and selling a covered call.akamaihd.net/items/it/img/arrow-10×10.png”> option is
Question 1 options:a) potential leverageb) safety of principalc) income receivedd) liquiditySaveQuestion 2 (2.5 points)
Question 2 UnsavedCall options, unlike warrants, may be written by individuals.
Question 2 options.akamaihd.net/items/it/img/arrow-10×10.png”>:a) True
b) False
SaveQuestion 3 (2.5 points)
Question 3 UnsavedIf the price of an option to buy stock were to sell for less than its strike price, an opportunity for arbitrage exists.
Question 3 options:a) True
b) False
SaveQuestion 4 (2.5 points)
Question 4 UnsavedThe most the individual who buys a put option can lose is the cost of the option.
Question 4 options:a) True
b) False
SaveQuestion 5 (2.5 points)
Question 5 UnsavedThe intrinsic value of a put establishes the put’s maximum price.
Question 5 options:a) True
b) False
SaveQuestion 6 (2.5 points)
Question 6 UnsavedA call is an option to
Question 6 options:a) sell stock at a specified priceb) buy stock at a specified pricec) deliver stock at a specified priced) deliver bonds at a specified priceSaveQuestion 7 (2.5 points)
Question 7 UnsavedThe profits (gains) on option trading are exempt from federal income taxation.
Question 7 options:a) True
b) False
SaveQuestion 8 (2.5 points)
Question 8 UnsavedCall options offer buyers
Question 8 options:a) potential leverageb) liquidityc) incomed) safety of principalSaveQuestion 9 (2.5 points)
Question 9 UnsavedWhen a call option is exercised, new stock is issued.
Question 9 options:a) True
b) False
SaveQuestion 10 (2.5 points)
Question 10 UnsavedThe maximum potential profit on a covered call is the time premium paid for the stock.
Question 10 options:a) True
b) False
SaveQuestion 11 (2.5 points)
Question 11 UnsavedIf investors believe that a stock’s prices will fluctuate but they are not certain as to the direction, these investors may buy a straddle.
Question 11 options:a) True
b) False
SaveQuestion 12 (2.5 points)
Question 12 UnsavedIf the investor buys a bear spread, the individual anticipates
Question 12 options:a) higher interest ratesb) higher option pricesc) lower stock pricesd) lower put pricesSaveQuestion 13 (2.5 points)
Question 13 UnsavedIf the investor buys a bull spread, the individual anticipates
Question 13 options:a) higher call priceb) higher stock pricesc) lower stock pricesd) lower call pricesSaveQuestion 14 (2.5 points)
Question 14 UnsavedIf the investor anticipates that the price of a stock will fluctuate, this individual may
Question 14 options:a) sell a call and sell a putb) buy a call and buy a putc) buy a call and sell a putd) sell a call and buy a putSaveQuestion 15 (2.5 points)
Question 15 UnsavedThe hedge ratio indicates the number of call options that is necessary to offset price movements in the underlying stock.
Question 15 options:a) True
b) False
SaveQuestion 16 (2.5 points)
Question 16 UnsavedAccording to the Black/Scholes option valuation model, a call option’s value increases if
Question 16 options:a) stock prices increase and interest rates decreaseb) the time to expiration decreases and interest rates increasec) the variability of the stock’s return increases and stock prices increased) interest rates decrease and the variability of the stock’s return increasesSaveQuestion 17 (2.5 points)
Question 17 UnsavedWriting both a put and a call at the same strike price and expiration date is an illustration of a straddle.
Question 17 options:a) True
b) False
SaveQuestion 18 (2.5 points)
Question 18 UnsavedThe protective call strategy is an illustration of a short position.
Question 18 options:a) True
b) False
SaveQuestion 19 (2.5 points)
Question 19 UnsavedPut-call parity suggests that the sum of the prices of a stock, a call and a put on that stock, and a debt instrument maturing at the expiration of the options must equal zero.
Question 19 options:a) True
b) False
SaveQuestion 20 (2.5 points)
Question 20 UnsavedBuying a call and a treasury bill produces similar results as buying a stock and a put.
Question 20 options:a) True
b) False
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