Reference no: EM13512615
Multiple Choice
1.A primary advantage of futures options is that they
a.require no cash outflow when purchased.
b.permit the adjustment of portfolio risk/return exposure.
c.are guaranteed by the Securities Exchange Commission.
d.have larger premiums than other options.
2.The price of a futures option is a function of
a.time value and intrinsic value.
b.time value, intrinsic value, commodity exchange value.
c.time value, intrinsic value, futures value.
d.time value, futures value, commodity exchange value.
3.A person buys 1 Soybean futures call (5,000 bushels) @ $0.0445. What is his/her maximum possible loss?
a.$222.50
b.$445.00
c.$44.50
d.$22.25
4.Early exercise of futures options is sometimes optimal when
a.the underlying futures contract value is not changing.
b.the option becomes far out of the money.
c.the option becomes deep in the money.
d.the option delta approaches zero.
5.Futures options are best priced using the
a.Scholes options pricing model.
b.Black options pricing model.
c.Black Scholes option pricing model.
d.Scholes Black option pricing model.
6.The holder of a futures option may do all of the following except
a.renew it.
b.exercise it.
c.sell it.
d.abandon it.
7.The expression for a futures option delta differs from the expression for a stock option delta by
a.a time value of money factor.
b.a conversion factor.
c.a duration factor.
d.a beta factor.
8.The Black Scholes option pricing model works least well with
a.index options.
b.equity options.
c.blue chip stock options.
d.foreign currency options.
9.A warrant hedge is similar to a _____ strategy.
a.covered call
b.protective put
c.long call
d.long put
10. When-issued shares tend to sell
a.for slightly less than they theoretically should.
b.for slightly more than they theoretically should.
c.for their theoretical value.
d.for the same price as the existing shares.