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Question
Identify the five factors of the Black-Scholes option pricing model and identify whether each factor must increase or decrease to cause the price of a put option to increase.Answer
This answer is hidden. It contains 193 characters.
Related questions
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Which one of the following is equal to net income expressed as a percentage of total assets?
A. return on equity
B. return on the balance sheet
C. operating yield
D. net yield
E. return on assets
Q:
Which one of the following is the definition of investment cash flow?
A. revenue minus expenses
B. cash flow from the purchases and sales of fixed assets and investments
C. cash flow originating from the issuance of securities
D. cash generated by a firm's normal business activities
E. pre-tax income
Q:
Which one of the following represents the amounts owed by a firm to other parties?
A. assets
B. cash inflows
C. equities
D. liabilities
E. expenses
Q:
Which one of the following is defined as anything a firm owns that has value?
A. equity
B. asset
C. liability
D. cash inflow
E. cash outflow
Q:
A firm has sales of $685,000 and cost of goods sold of $435,000. The firm expects sales to increase by 6 percent next year. What is the gross profit amount expected to be next year if the firm uses the percentage of sales approach when compiling pro forma statements?
A. $235,100
B. $265,000
C. $335,000
D. $355,100
E. $536,100
Q:
Bay Marina, Inc. has net income of $53,700 and has 30,000 shares of stock outstanding. Similar firms have a price-earnings ratio of 20. Given this, what should the market price of Bay Marina, Inc. stock be per share?
A. $28.91
B. $29.29
C. $30.40
D. $33.91
E. $35.80
Q:
A company has a price-earnings ratio of 23 and a price-cash flow ratio of 11.5. If the earnings per share are $1.75, what is the cash flow per share?
A. $2.16
B. $2.51
C. $3.06
D. $3.14
E. $3.50
Q:
Healthy Supplements, Inc. paid $7,300 in interest and $4,300 in dividends for the year. The firm also issued $15,000 worth of new equity securities. What is the amount of the financing cash flow?
A. $2,500
B. $5,200
C. $6,800
D. $7,700
E. $10,700
Q:
GH Enterprises has annual sales of $5.2 million, depreciation of $350,000, operating expenses of $390,000, and cost of goods sold of $3.1 million. What is the gross profit?
A. $460,000
B. $850,000
C. $2,100,000
D. $2,650,000
E. $3,710,000
Q:
Which one of the following statements related to book value per share (BVPS) is correct?
A. BVPS is equal to total assets divided by the number of shares outstanding.
B. An increase in the market value of a firm's fixed assets will increase the firm's BVPS.
C. The payment of a dividend increases BVPS.
D. BVPS is equal to the market price of a share of stock.
E. The issuance of new shares at market value may increase the BVPS.
Q:
Which one of the following statements is correct?
A. Pretax income is equal to gross profit minus interest expense.
B. Gross profit is equal to sales minus costs of goods sold and depreciation.
C. Operating expenses are indirect costs.
D. Costs that vary directly with production are classified as operating expenses.
E. The change in retained earnings is equal to net income plus dividends paid.
Q:
Mike was granted stock options on 1,000 shares of his employer's stock. The stock is currently selling for $27.70 a share and has a standard deviation of 36 percent. The option's strike price is $27.50 and the time to maturity is 10 years. What is the value of each option given a risk-free rate of 3 percent? Assume that no dividends are paid.A. $14.35B. $15.67C. $17.80D. $20.15E. $22.70
Q:
A stock is currently priced at $22 a share while the $30 put option is priced at $5.22. The put option delta is -.25. What is the approximate put price if the stock increases in value to $25?
A. $3.76
B. $4.97
C. $5.08
D. $5.27
E. $5.50
Q:
Given a set of variables, the Black-Scholes option pricing formula has a put option delta of -.154. What is the call delta given these same variables?
A. -1.154
B. -.846
C. .846
D. 1.154
E. The answer cannot be determined based on the information provided.
Q:
Given a set of variables, the Black-Scholes option pricing formula has a call option delta of .496. What is the put delta given these same variables?
A. -1.496
B. -.504
C. .504
D. 1.496
E. The answer cannot be determined based on the information provided.
Q:
What is the put option premium given the following information? A. $7.49
B. $7.98
C. $8.28
D. $8.76
E. $9.64
Q:
What is the put option premium given the following information? A. $3.62
B. $4.23
C. $4.47
D. $4.89
E. $5.01
Q:
What is the call option premium given the following information? A. $5.91
B. $6.28
C. $6.75
D. $6.90
E. $7.13
Q:
A stock with a current price of $25 will either move up to $32 or down to $20 over the next period. The risk-free rate of interest is 3.5 percent. What is the value of a call option with a strike price of $30?A. $0.61B. $0.72C. $0.93D. $1.11E. $1.36
Q:
Which one of the following inputs is included in the Black-Scholes-Merton model but not in the Black-Scholes model?
A. stock price volatility
B. time to option maturity
C. risk-free interest rate
D. underlying stock price
E. dividend yield
Q:
Which two of the following are key to making SPX options an easy choice as a hedge against an equity portfolio?
I. European style
II. American style
III. trade in whole or partial contracts
IV. cash settlement
A. III only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
Q:
Which one of the following situations will produce the highest put price, all else constant? Assume the options are all in-the-money.
A. $50 stock price; 60 days to option expiration
B. $50 stock price; 90 days to option expiration
C. $55 stock price; 60 days to option expiration
D. $55 stock price; 90 days to option expiration
E. Insufficient information is provided to answer this question.
Q:
Which one of the following is the upper price bound for the intrinsic value of a European call option on a stock?
A. $0
B. strike price
C. stock price
D. Max (S - K, 0)
E. Max (K - S, 0)
Q:
Which one of the following is a bear call spread?
A. buying a $20 call and selling a $25 call on the same stock
B. selling a $20 call and buying a $20 call on the same stock
C. buying a $20 call and selling a $15 call on the same stock
D. selling a $20 call and buying a $25 put
E. buying a $20 call and selling a $25 put
Q:
You bought a put with a strike price of $25. The current stock price is $23. What is the current payoff value of this option?
A. -$2
B. -$1
C. $0
D. $1
E. $2
Q:
Which one of the following combinations creates an in-the-money option?
A. underlying stock price is less than the strike price of a call
B. underlying stock price is $18 and the put has an exercise price of $15
C. underlying stock price is $22 and the call has an exercise price of $25
D. put strike price exceeds the underlying stock price
E. put price is equal to the call price
Q:
Consider both a European put and call that expire in June and have a strike price of $30. The no-arbitrage relationship between this put and call is referred to as which one of the following?
A. intrinsic equilibrium
B. Euro-match
C. bull-call spread
D. butterfly spread
E. put-call parity
Q:
Kris implemented an option trading strategy consisting of two call options. This strategy is known as which one of the following?
A. spread
B. straddle
C. split
D. combination
E. counteraction
Q:
Selling a call option on stock which you own is referred to as which one of the following strategies?
A. covered call
B. naked call
C. protective put
D. underlying put
E. straddle
Q:
You currently own 300 shares of Microsoft stock. If you purchase options on this stock to protect against future declines in the price of the stock you are implementing which one of the following?
A. covered call
B. naked call
C. protective put
D. bear spread
E. straddle