Finance- Chapter 16

Front 1

Which one of the following terms is used as a shortcut means of saying "time to maturity"?

Back 1

expiry

Front 2

Delta measures the dollar impact of a change in which one of the following on the value of a stock option?

Back 2

underlying stock price

Front 3

Which one of the following is defined as an estimate of stock price volatility obtained from an option price?

Back 3

implied standard deviation

Front 4

Which one of the following is another term for implied volatility?

Back 4

implied standard deviation

Front 5

VIX represents the volatility index on which one of the following?

Back 5

S&P 500 index

Front 6

Employee stock options grant an employee which one of the following rights?

Back 6

right to buy shares of the employer's stock

Front 7

You know that a call will finish in-the-money. Based on that single piece of information, you also know which one of the following?

Back 7

A put on the same underlying asset with the same strike and expiration will finish out-of-the- money.

Front 8

Which one of the following statements is correct concerning the Black-Scholes option pricing model?

Back 8

The model expresses time in terms of years

Front 9

Which one of the following variables is NOT included in the Black-Scholes option pricing model?

Back 9

market rate of return

Front 10

Which two of the following have the greatest effect on stock option prices?

Back 10

III. underlying stock price
IV. option strike price

Front 11

An increase in which two of the following will have a negative effect on the value of a put option?

Back 11

I. risk-free interest rate
III. underlying stock price

Front 12

An increase in which one of the following will have a negative effect on the price of a call option?

Back 12

option strike price

Front 13

Which one of the following best describes the graphical relationship between stock prices and option prices?

Back 13

convexity

Front 14

Which of the following will result from a decrease in an option's strike price?

Back 14

I. increase in call option price
IV. decrease in put option price

Front 15

Which one of the following statements concerning the relationship between time to option maturity and call and put prices is correct?

Back 15

Call prices tend to increase faster than put prices as the time to option maturity increases.

Front 16

Which one of the following statements concerning the relationship between the volatility of the underlying stock price, as measured by sigma, and call and put prices is correct?

Back 16

Call and put prices react fairly similarly in response to changes in sigma.

Front 17

Which option price(s) will increase when the interest rate increases?

Back 17

call only

Front 18

Which option price(s) will increase when the dividend yield increases?

Back 18

put only

Front 19

Which one of the following statements concerning option prices is correct?

Back 19

There is a relatively linear direct relationship between the volatility of the underlying stock price and option prices.

Front 20

Which one of the following situations will produce the highest call price, all else constant?

Back 20

$41 stock price; $40 strike price