BADM 710 Exam 2 Preparation Material
BADM 710 EXAM 2 PREPARATION MATERIAL 2025/2026
COMPLETE 100 QUESTIONS AND CORRECT ANSWERS |ALREADY
GRADED A+
Jillian owns a call option on WAN stock with a strike price of $20 a share.
Currently, WAN is selling for $24.50 a share. Jillian would like to profit on this
option but is not permitted to exercise the option for another two weeks. She
believes the stock will decline in value before the two weeks is up. What should
she do?
A. Sell her option today
B. Place an order to exercise her option on its expiration date
C. Purchase an additional call option on WAN today with a strike price of $20
D. Place an order to exercise her option as soon as she is permitted to do so
E. Convert her American option into a European option
A
Which of these will decrease the value of a put option?
I. An increase in the market value of the underlying asset
II. An increase in the option's strike price
III. A decrease in the market value of the underlying asset
IV. A decrease in the option's strike price
A. I and II only
B. I and IV only
C. II and III only
D. III only
E. IV only
B
An in-the-money put option is one that:
A. Has an exercise price greater than the underlying stock price
B. Has an exercise price less than the underlying stock price
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C. Expires today
D. Should not be exercised at expiration
E. Should not be exercised at any time
A
A put option on ABC stock with an exercise price of $35 expires today. The current
price of ABC stock is $36. The put is:
A. Funded
B. Unfunded
C. At the money
D. In the money
E. Out of the money
E
Which one of the following statements concerning call option writers is true?
A. Call option writers promise to purchase shares if the call option is exercised
B. The call option writer has the option, but no the obligation, to purchase shares
if the option is exercised
C. The call option writer is betting that the market price of the underlying asset
will increase
D. The call option writer receives a cash payment when the option is written
E. The call option writer earns a profit when an in-the-money option is exercised
D
The value of an option if it were to immediately expire, that is, its lower pricing
bound, is called an option's _____ value.
A. Strike
B. Market
C. Volatility
D. Time
E. Intrinsic
E
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, BADM 710 Exam 2 Preparation Material
The maximum value of a call option is equal to the:
A. Strike price minus the initial cost of the option
B. Exercise price plus the price of the underlying stock
C. Strike price
D. Price of the underlying stock
E. Purchase price
D
(Screenshot 2)
What is the cost of four October 40 put option contracts on a stock given the
following price quotes?
A. $22
B. $26
C. $240
D. $88
E. $104
E
(Screenshot 3)
What is the value of one August 25 call option contract?
A. $4.60
B. $0.10
C. $615
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BADM 710 EXAM 2 PREPARATION MATERIAL 2025/2026
COMPLETE 100 QUESTIONS AND CORRECT ANSWERS |ALREADY
GRADED A+
Jillian owns a call option on WAN stock with a strike price of $20 a share.
Currently, WAN is selling for $24.50 a share. Jillian would like to profit on this
option but is not permitted to exercise the option for another two weeks. She
believes the stock will decline in value before the two weeks is up. What should
she do?
A. Sell her option today
B. Place an order to exercise her option on its expiration date
C. Purchase an additional call option on WAN today with a strike price of $20
D. Place an order to exercise her option as soon as she is permitted to do so
E. Convert her American option into a European option
A
Which of these will decrease the value of a put option?
I. An increase in the market value of the underlying asset
II. An increase in the option's strike price
III. A decrease in the market value of the underlying asset
IV. A decrease in the option's strike price
A. I and II only
B. I and IV only
C. II and III only
D. III only
E. IV only
B
An in-the-money put option is one that:
A. Has an exercise price greater than the underlying stock price
B. Has an exercise price less than the underlying stock price
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, BADM 710 Exam 2 Preparation Material
C. Expires today
D. Should not be exercised at expiration
E. Should not be exercised at any time
A
A put option on ABC stock with an exercise price of $35 expires today. The current
price of ABC stock is $36. The put is:
A. Funded
B. Unfunded
C. At the money
D. In the money
E. Out of the money
E
Which one of the following statements concerning call option writers is true?
A. Call option writers promise to purchase shares if the call option is exercised
B. The call option writer has the option, but no the obligation, to purchase shares
if the option is exercised
C. The call option writer is betting that the market price of the underlying asset
will increase
D. The call option writer receives a cash payment when the option is written
E. The call option writer earns a profit when an in-the-money option is exercised
D
The value of an option if it were to immediately expire, that is, its lower pricing
bound, is called an option's _____ value.
A. Strike
B. Market
C. Volatility
D. Time
E. Intrinsic
E
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, BADM 710 Exam 2 Preparation Material
The maximum value of a call option is equal to the:
A. Strike price minus the initial cost of the option
B. Exercise price plus the price of the underlying stock
C. Strike price
D. Price of the underlying stock
E. Purchase price
D
(Screenshot 2)
What is the cost of four October 40 put option contracts on a stock given the
following price quotes?
A. $22
B. $26
C. $240
D. $88
E. $104
E
(Screenshot 3)
What is the value of one August 25 call option contract?
A. $4.60
B. $0.10
C. $615
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