UMUC FIN 620 Homework 9 Options Answers
UMUC FIN 620 Homework 9 Options Answers
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FIN 620 Quiz 9 Capital Structure and MM Answers 2020 (UMUC)
1. The maximum loss for writing a put option is infinity
2. The potential loss for writing a short (or naked) call option in infinite.
3. The value of a call option goes up with which of the following?
4. A short call option is sold for 1,600 dollars and covers 100 shares of Johnson Incorporated. If the Strike price of the option is 50, what is the break-even share price?
5. A put option covering 100 shares sells for 1,900. If the strike price of the put option is 10, what is the maximum loss for the put buyer?
6. You purchase a long call option giving you the right to buy 100 shares of Mises Corporation for a total premium of $1,200. The strike price on the option is $10 and the final stock price is $50. What is your profit or loss?
7. You purchase a long put option giving you the right to sell 100 shares of Bohm Corporation for a premium of $2,600. The strike price of the option is $110 and the final stock price is $45. What is your profit or loss?
8. You write a short put option giving the purchaser the right to sell 100 shares of Rothbard Corporation for a premium of $2,100. The strike price of the option is $20 and the final stock price is $95. What is your profit or loss?
9. You write a short call option giving the purchaser the right to buy 100 shares of Garrett Corporation for a premium of $2,900. The strike price of the option is $15 and the final stock price is $225. What is your profit or loss?
10. A call option has a strike price of 80 in dollars, and a time to expiration of 0.5 in years. If the stock is trading for 71 dollars, N(d1) = 0.5, N(d2) = 0.4, and the risk free rate is0.02, what is the value of the call option?
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