Chapter 24 Options and Corporate Finance

At $43:
Value of call option position = $0
Value of put option position = $2

Net payoff = $0 + 2
Net payoff = $2

At $47:
Value of call option position = $2
Value of put option position = $0

Net payoff = $2 + 0
Net payoff = $2

Student name:
1) A(n) grants its owner the right to buy or to sell an asset at a fixed price at any time
during a stated period.
1)


A) American option
B) forward contract
C) futures contract
D) swap
E) European option



Question Details
Learning Objective : 24-01 Lay out the basics of call and put options and explain how to calculate th
Section : 24.1 Options: The Basics
Topic : Option types and features
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Basic
Bloom's : Remember
Accessibility : Screen Reader Compatible

,2) Nicole owns a call option on 100 shares of Apple stock. She has just decided to purchase
the Apple shares. In other words, she has decided to:
2)


A) strike the asset.
B) expire the option.
C) exercise the option.
D) place the collar.
E) unwind the option collar.



Question Details
Learning Objective : 24-01 Lay out the basics of call and put options and explain how to calculate th
Section : 24.1 Options: The Basics
Topic : Options
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Basic
Bloom's : Remember
Accessibility : Screen Reader Compatible




3) An option's strike price is also called the:
3)


A) opening price.
B) intrinsic value.
C) exercise price.
D) market price.
E) time value.

,Question Details
Learning Objective : 24-01 Lay out the basics of call and put options and explain how to calculate th
Section : 24.1 Options: The Basics
Topic : Options
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Basic
Bloom's : Remember
Accessibility : Screen Reader Compatible




4) The final day on which an option can be exercised is called the:
4)


A) payment date.
B) ex-option date.
C) opening date.
D) expiration date.
E) intrinsic date.



Question Details
Learning Objective : 24-01 Lay out the basics of call and put options and explain how to calculate th
Section : 24.1 Options: The Basics
Topic : Options
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Basic
Bloom's : Remember
Accessibility : Screen Reader Compatible




5) Assume you purchase one call option contract on a stock that is currently selling for $12
per share. What is the maximum amount you can lose?
5)

, A) The market price of the stock multiplied by 100
B) The strike price multiplied by 100
C) The strike price per share
D) The option premium per share multiplied by 100
E) The option premium per share



Question Details
Learning Objective : 24-01 Lay out the basics of call and put options and explain how to calculate th
Section : 24.1 Options: The Basics
Topic : Option valuations and payoffs
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Basic
Bloom's : Remember
Accessibility : Screen Reader Compatible




6) Darius purchased an option that he can exercise only on the final day of the option
period. Which type of option did he purchase?
6)


A) European
B) American
C) Inflexible
D) Dated
E) Pointed



Question Details
Learning Objective : 24-01 Lay out the basics of call and put options and explain how to calculate th
Section : 24.1 Options: The Basics
Topic : Option types and features
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 1 Basic
Bloom's : Remember
Accessibility : Screen Reader Compatible