FINANCE 6100 SUU EXAM 3 2025/26 EXAM QUESTIONS WITH COMPLETE SOLUTIONS.

Long the contract - CORRECT ANSWER-Right to exercise option or not, pay premium to other person to buy the right Short the contract - CORRECT ANSWER-You are paid to accept risk if other exercises and you trade asset In the money - CORRECT ANSWER-Today for positive gain Positive intrinsic value Out the money - CORRECT ANSWER-Not today 0 intrinsic value Option premium: Intrinsic value - CORRECT ANSWER-Payoff sold right now Option premium: Time value - CORRECT ANSWER-Extra value with remaining time for option expiration American - CORRECT ANSWER-Any time until maturity date European - CORRECT ANSWER-Only on maturity date Define call - CORRECT ANSWER-Buy at prearranged price by set date, prices rises Define put - CORRECT ANSWER-Sell at prearranged price by set date, price falls Call - exercise (strike) price - CORRECT ANSWER-Fixed price X Call - expiration (maturity) date - CORRECT ANSWER-Certain date T Call - option premium - CORRECT ANSWER-Price paid by buyer to seller to obtain right Put - exercise (strike) price - CORRECT ANSWER-Fixed price Put - expiration (maturity) date - CORRECT ANSWER-Certain date Put - option premium - CORRECT ANSWER-Price paid by buyer to sell to obtain rightFuture price - CORRECT ANSWER-Contract call for delivery of commodity at specified delivery or maturity date Long position - CORRECT ANSWER-Trader commits to purchasing commodity on date Short position - CORRECT ANSWER-Trader commits to delivering commodity at contract maturity