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FINA 3315 EXAM 2 2026
ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
1. Covered Call - correct answer-Writing a call on an asset
together with buying the asset.
2. European Option - correct answer-Can only be exercised at
its expiration.
3. In the Money - correct answer-An option where exercise
would generate positive cash flow.
4. Out of the Money - correct answer-An option which, if
exercised, would produce a negative cash flow. Out of the
money options are therefore never exercised.
5. Premium - correct answer-Purchase price of an option.
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6. Protective Put - correct answer-An asset combined with a put
option that guarantees minimum proceeds equal to the put's
exercise price.
7. Put Option - correct answer-The right to sell an asset at a
specified exercise price on or before a specified expiration
date.
8. Risk Management - correct answer-Strategies to limit the risk
of a portfolio.
9. Spread - correct answer-A combination of two or more call
options or put options on the same asset with differing
exercise prices or times to expiration.
10. Straddle - correct answer-A combination of a call and a
put, each with the same exercise price and expiration date.
11. Strike Price/Exercise Price - correct answer-Price set for
calling (buying) an asset or putting (selling) an asset.
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12. Warrant - correct answer-An option issued by the firm to
purchase shares of the firm's stock.
13. Basis - correct answer-The difference between the futures
price and the spot price.
14. Basis Risk - correct answer-Risk attributable to uncertain
movements in the spread between a futures price and a spot
price.
15. Cash Settlement - correct answer-The cash value of the
underlying asset (rather than the asset itself) is delivered to
satisfy the contract.
16. Clearinghouse - correct answer-Established by exchanges
to facilitate trading. The clearinghouse may interpose itself
as an intermediary between two traders.
FINA 3315 EXAM 2 2026
ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
1. Covered Call - correct answer-Writing a call on an asset
together with buying the asset.
2. European Option - correct answer-Can only be exercised at
its expiration.
3. In the Money - correct answer-An option where exercise
would generate positive cash flow.
4. Out of the Money - correct answer-An option which, if
exercised, would produce a negative cash flow. Out of the
money options are therefore never exercised.
5. Premium - correct answer-Purchase price of an option.
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6. Protective Put - correct answer-An asset combined with a put
option that guarantees minimum proceeds equal to the put's
exercise price.
7. Put Option - correct answer-The right to sell an asset at a
specified exercise price on or before a specified expiration
date.
8. Risk Management - correct answer-Strategies to limit the risk
of a portfolio.
9. Spread - correct answer-A combination of two or more call
options or put options on the same asset with differing
exercise prices or times to expiration.
10. Straddle - correct answer-A combination of a call and a
put, each with the same exercise price and expiration date.
11. Strike Price/Exercise Price - correct answer-Price set for
calling (buying) an asset or putting (selling) an asset.
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12. Warrant - correct answer-An option issued by the firm to
purchase shares of the firm's stock.
13. Basis - correct answer-The difference between the futures
price and the spot price.
14. Basis Risk - correct answer-Risk attributable to uncertain
movements in the spread between a futures price and a spot
price.
15. Cash Settlement - correct answer-The cash value of the
underlying asset (rather than the asset itself) is delivered to
satisfy the contract.
16. Clearinghouse - correct answer-Established by exchanges
to facilitate trading. The clearinghouse may interpose itself
as an intermediary between two traders.
