FINANCE 6100 SUU EXAM 3 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
Define call - Answers Buy at prearranged price by set date, prices rises
Define put - Answers Sell at prearranged price by set date, price falls
Call - exercise (strike) price - Answers Fixed price X
Call - expiration (maturity) date - Answers Certain date T
Call - option premium - Answers Price paid by buyer to seller to obtain right
Put - exercise (strike) price - Answers Fixed price
Put - expiration (maturity) date - Answers Certain date
Put - option premium - Answers Price paid by buyer to sell to obtain right
Long the contract - Answers Right to exercise option or not, pay premium to other person to buy the
right
Short the contract - Answers You are paid to accept risk if other exercises and you trade asset
In the money - Answers Today for positive gain
Positive intrinsic value
Out the money - Answers Not today
0 intrinsic value
Option premium: Intrinsic value - Answers Payoff sold right now
Option premium: Time value - Answers Extra value with remaining time for option expiration
American - Answers Any time until maturity date
European - Answers Only on maturity date
Future price - Answers Contract call for delivery of commodity at specified delivery or maturity date
Long position - Answers Trader commits to purchasing commodity on date
Short position - Answers Trader commits to delivering commodity at contract maturity
Profit to long - Answers Spot price at maturity - original future price
Profit to short - Answers Original future price - spot price at maturity
Spot price - Answers Actual market price of commodity
Corporate hedging process - Answers Identify risks
Difference of hedging and speculating
Cost of hedging with light of cost or not
Right measurement to evaluate hedge performance
Dont base on market view
Understand tools
System of controls
Merger - Answers 2 parties together, voluntary
Acquisition - Answers 1 party buy out other, semi voluntary
Asset Acquisition - Answers When one corporation agrees to purchase the assets, such as property,
buildings, and equipment, of a second corporation
Equity Acquisition - Answers Gain control
horizontal merger - Answers the combination of two or more firms competing in the same market
with the same good or service
vertical merger - Answers the combination of two or more firms involved in different stages of
producing the same good or service
conglomerate merger - Answers the joining of firms in completely unrelated industries
Why perform merger? - Answers Increase market share lead to decrease cost and increase pricing
power
Efficiencies of scale
Eliminate redundancies
Remove excess capacity from market that decreased profits for all
Stock management overvalued
Why not perform merger? - Answers Have money, spend money
Diversification
Ratching up earnings
Leverage buy out - Answers Acquisition by outside firms
Debt drives deal (little debt relative to liquid assets)
divestiture - Answers the transfer of total or partial ownership of some of a firm's operations to
investors or to another company
Define call - Answers Buy at prearranged price by set date, prices rises
Define put - Answers Sell at prearranged price by set date, price falls
Call - exercise (strike) price - Answers Fixed price X
Call - expiration (maturity) date - Answers Certain date T
Call - option premium - Answers Price paid by buyer to seller to obtain right
Put - exercise (strike) price - Answers Fixed price
Put - expiration (maturity) date - Answers Certain date
Put - option premium - Answers Price paid by buyer to sell to obtain right
Long the contract - Answers Right to exercise option or not, pay premium to other person to buy the
right
Short the contract - Answers You are paid to accept risk if other exercises and you trade asset
In the money - Answers Today for positive gain
Positive intrinsic value
Out the money - Answers Not today
0 intrinsic value
Option premium: Intrinsic value - Answers Payoff sold right now
Option premium: Time value - Answers Extra value with remaining time for option expiration
American - Answers Any time until maturity date
European - Answers Only on maturity date
Future price - Answers Contract call for delivery of commodity at specified delivery or maturity date
Long position - Answers Trader commits to purchasing commodity on date
Short position - Answers Trader commits to delivering commodity at contract maturity
Profit to long - Answers Spot price at maturity - original future price
Profit to short - Answers Original future price - spot price at maturity
Spot price - Answers Actual market price of commodity
Corporate hedging process - Answers Identify risks
Difference of hedging and speculating
Cost of hedging with light of cost or not
Right measurement to evaluate hedge performance
Dont base on market view
Understand tools
System of controls
Merger - Answers 2 parties together, voluntary
Acquisition - Answers 1 party buy out other, semi voluntary
Asset Acquisition - Answers When one corporation agrees to purchase the assets, such as property,
buildings, and equipment, of a second corporation
Equity Acquisition - Answers Gain control
horizontal merger - Answers the combination of two or more firms competing in the same market
with the same good or service
vertical merger - Answers the combination of two or more firms involved in different stages of
producing the same good or service
conglomerate merger - Answers the joining of firms in completely unrelated industries
Why perform merger? - Answers Increase market share lead to decrease cost and increase pricing
power
Efficiencies of scale
Eliminate redundancies
Remove excess capacity from market that decreased profits for all
Stock management overvalued
Why not perform merger? - Answers Have money, spend money
Diversification
Ratching up earnings
Leverage buy out - Answers Acquisition by outside firms
Debt drives deal (little debt relative to liquid assets)
divestiture - Answers the transfer of total or partial ownership of some of a firm's operations to
investors or to another company
