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Quiz 15
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Q.1
Present value of portfolio is Rs 900 and current value of stock in portfolio is Rs 1500 then current option price would be
Rs 2,400.00
-Rs 600.00
-Rs 2,400.00
Rs 600.00
Q.2
Stock option is considered more valuable in situation when stock have
price hike in market
market stability
not volatile
highly volatile
Q.3
Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as
valued approach
marketability approach
stock approach
binomial approach
Q.4
Greater value of option, larger span of time value is usually results in
shorter call option
longer call option
longer put option
shorter put option
Q.5
Price at which European and American options can be exercised is classified as
exercise price
strike price
horizon price
Both A and B
Q.6
Current option price is added to present value of portfolio for calculating
future value of portfolio
current value of stock
future value of stock
present value of portfolio
Q.7
Current option is Rs 700 and current value of stock in portfolio is Rs 1400 then present value of portfolio will be
-Rs 700.00
Rs 2,100.00
Rs 700.00
Rs 2,000.00
Q.8
Present value of portfolio is Rs 500 and current option price is Rs 1200 then value of stock included in portfolio will be
Rs 1,700.00
-Rs 1,700.00
Rs 700.00
-Rs 700.00
Q.9
An option which can be exercised any desired time before an expiry date is classified as
Australian option
money option
European option
American option
Q.10
In financial planning, a higher strike price leads to call option
price is higher
rate is lower
price is lower
rate is higher
Q.11
In options pricing, an exercise price rises from lower to higher which leads to
volatile options
option value increases
option value decreases
option value stable
Q.12
In stock option, a little chance exists for large gain on stock when price of stock
have volatile movement
moves freely
rarely moves
stays same
Q.13
Present value of portfolio is Rs 1300 and current value of stock in portfolio is Rs 2300 then current option price will be
Rs 3,600.00
Rs 1,000.00
Rs 1,250.00
Rs 1,500.00
Q.14
An investor who buys shares and writes a call option on stock is classified as
put investor
call investor
hedger
volatile hedge
Q.15
Value of stock is Rs 1000 and current value of portfolio is Rs 1500 then obligation to cover call option will be
Rs 6,667.00
Rs 2,500.00
Rs 2,000.00
Rs 500.00
Q.16
According to Black Scholes model, short term seller receives today price which
short term cash proceeds
proceeds in cheques
full cash proceeds
zero proceeds
Q.17
When two portfolios have identical values and payoffs then it is classified as
binomial parity relationship
put parity relationship
put option parity relationship
put call parity relationship
Q.18
An investor who writes stock call options in his own portfolio is classified as
due option
covered option
undue option
uncovered option
Q.19
According to put call parity relationship, a call option minus put option in addition with present value of exercise is equal to
binomial property
constant property
constant and variable property
stock
Q.20
Current option is Rs 800 and current value of stock in portfolio is Rs 1900 then present value of portfolio would be
-Rs 1,100.00
Rs 2,700.00
Rs 1,100.00
-Rs 2,700.00
Q.21
Second step in binomial approach of option pricing is to define range of values
at expiration
at buying date
at exchange closing time
at exchange opening time
Q.22
In an option pricing, a rises in risk free rate results in option's value
slight time decreases
slight increases
slight decreases
slight time increases
Q.23
If current price increases from lower to higher then an
option value equal to one
option value will increase
option value will decrease
option value equal to zero
Q.24
In financial planning, formula MAX [current price of stock-strike price, 0] is used to calculate
option return rate
exercise value
option value
stock value
Q.25
In binomial approach of option pricing model, fourth step is to create
equalize domain of payoff
equalize ending price
riskless investment
high risky investment
Q.26
Current value of portfolio is Rs 550 and to cover an obligation of call option is Rs 200 then value of stock would be
Rs 350.00
Rs 275.00
Rs 750.00
Rs 1,000.00
Q.27
According to Black Scholes model, purchaser can borrow fraction of security at risk free interest rate which is
short term
long term
transaction cost
no transaction cost
Q.28
Current value of stock included in portfolio is subtracted from current option price to calculate
future value of stock
present value of portfolio
future value of portfolio
present value of stock
Q.29
In financial planning, most high option price will lead to
longer option period
smaller option period
lesser price
higher price
Q.30
An increase in value of option leads to low present value of exercise cost only if it has
low volatility
interest rates are high
interest rates are low
high volatility
Q.31
Third step in binomial approach of option pricing is to
equalize beginning price
equalize range of payoffs
equalize domain of payoff
equalize ending price
Q.32
A type of contract in which contract holder has right to sell an asset at specific period for predetermining price is classified as
option
written contract
determined contract
featured contract
Q.33
According to put call parity relationship, call option plus present value of exercise price minus stock is to calculate
present value of option
call option
put option
future value of option
Q.34
Input call parity relationship, put option minus call option in addition with stock is equal to
exercise price present value
exercise price future value
time line value
time value of bond
Q.35
According to top rating agencies S&P triple-A and double-A rating bonds are classified as an
extremely discounted
extremely safe
extremely risky
extremely inflated
Q.36
Coupon payment of bond which is fixed at time of issuance
remains same
becomes stable
becomes change
becomes low
Q.37
According to Black Schools model, stocks with call option pays the
dividends
no dividends
current price
past price
Q.38
Current value of stock in portfolio with current option price Rs 20 is Rs 50, then present value of portfolio would be
Rs 30.00
Rs 70.00
Rs 40.00
Rs 80.00
Q.39
Situation in financial options in which strike price is less than current price of stock is classified as
in-the-money
out-of-the-money
out-of-the-portfolio
in-the-portfolio
Q.40
An exercise of option in future and part of option call value depends specifically on
PV of exercising cost
FV of exercising cost
PV of cost volatility
FV of cost volatility
Q.41
Yield on Treasury bill with a maturity is classified as a risk free rate but must be equal to an
option closing price
option beginning price
option expiration
option model
Q.42
Types of option markets do not include
European option
American option
expiry option
covered options
Q.43
In binomial approach of option pricing model, value of stock is subtracted from call option obligation value to calculate
current value of portfolio
future value of portfolio
put option value
call option value
Q.44
A usage of proceeds of new issue to retire issue with high-rate is classified as
refunding operation
funding operation
proceeds operation
deferred operation
Q.45
If default probability is zero and bond is not called then yield to maturity is
mature expected return rate
lower than expected return rate
higher than expected return rate
equal to expected return rate
Q.46
Rate on debt that increases as soon market rises is classified as
rising bet rate
floating rate debt
market rate debt
stable debt rate
Q.47
If market interest rate rises above coupon rate then bond will be sold
equal to return rate
seasoned price
below its par value
above its par value
Q.48
Bonds that can be converted into shares of common stock are classified as
convertible bonds
stock bonds
shared bonds
common bonds
Q.49
Input call parity relationship, present value of exercise price is added to call option which is equal to
put option stock
call option + stock
call option + market price
put option + market price
Q.50
Stated value of bonds or face value is considered as
state value
par value
bond value
per value
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