Reference no: EM133227529

Question 1. Which of the following is acquired (in addition to a cash payoff) when the holder of a put futures exercises?

a. A long position in a futures contract

b. A short position in a futures contract

c. A long position in the underlying asset

d. A short position in the underlying asset

Question 2. A futures price is currently 40 cents. It is expected to move up to 44 cents or down to 34 cents in the next six months. The risk-free interest rate is 6%. What is the value of a six month call option with a strike price of 39 cents?

a. 5.00 cents

b. 2.91 cents

c. 3.00 cents

d. 4.21 cents

Question 3. What is the cash settlement if a put futures option on 50 units of the underlying asset is exercised?

a. (Current Futures Price - Strike Price) times 50

b. (Strike Price - Current Futures Price) times 50

c. (Most Recent Futures Settlement Price - Strike Price) times 50

d. (Strike Price - Most Recent Futures Settlement Price) times 50

Question 4. For an American call option, Black's approximation is:

a. the difference between the share price and the present value of the exercise price minus the dividend.

b. the greater of the share price and the present value of the exercise price minus the dividend.

c. the greater of the share price and the present value of the exercise price plus the dividend.

d. the difference between the price of a European option expiring at the ex-dividend date and the price of a European option expiring at the same time as the American option.

e. the greater of the price of a European option expiring at the ex-dividend date and the price of a European option expiring at the same time as the American option.

Question 5. What does theta measure?

a. The rate of change of delta with the asset price

b. The rate of change of the portfolio value with the passage of time

c. The sensitivity of a portfolio value to interest rate changes

d. None of the above