投资学英文第7版Test Bank答案chap020.doc

Chapter 20 Options Markets: Introduction Multiple Choice Questions1.The price that the buyer of a call option pays to acquire the option is called the A)strike price B)exercise price C)execution price D)acquisition price E)premium Answer: E Difficulty: Easy 2.The price that the writer of a call option receives to sell the option is called the A)strike price B)exercise price C)execution price D)acquisition price E)premium Answer: E Difficulty: Easy 3.The price that the buyer of a put option pays to acquire the option is called the A)strike price B)exercise price C)execution price D)acquisition price E)premium Answer: E Difficulty: Easy 4.The price that the writer of a put option receives to sell the option is called the A)premium B)exercise price C)execution price D)acquisition price E)strike price Answer: A Difficulty: Easy 5.The price that the buyer of a call option pays for the underlying asset if she executes her option is called the A)strike price B)exercise price C)execution price D)A or C E)A or B Answer: E Difficulty: Easy 6.The price that the writer of a call option receives for the underlying asset if the buyer executes her option is called the A)strike price B)exercise price C)execution price D)A or B E)A or C Answer: D Difficulty: Easy 7.The price that the buyer of a put option receives for the underlying asset if she executes her option is called the A)strike price B)exercise price C)execution price D)A or C E)A or B Answer: E Difficulty: Easy 8.The price that the writer of a put option receives for the underlying asset if the option is exercised is called the A)strike price B)exercise price C)execution price D)A or B E)none of the above Answer: E Difficulty: Easy 9.An American call option allows the buyer to A)sell the underlying asset at the exercise price on or before the expiration date. B)buy the underlying asset at the exercise price on or before the expiration date. C)sell the option in the open market prior to expiration. D)A and C. E)B and C. Answer: E Difficulty: Easy Rationale: An American call option may be exercised (allowing the holder to buy the underlying asset) on or before expiration; the option contract also may be sold prior to expiration.10.A European call option allows the buyer to A)sell the underlying asset at the exercise price on the expiration date. B)buy the underlying asset at the exercise price on or before the expiration date. C)sell the option in the open market prior to expiration. D)buy the underlying asset at the exercise price on the expiration date. E)C and D. Answer: E Difficulty: Easy Rationale: A European call option may be exercised (allowing the holder to buy the underlying asset) on the expiration date; the option contract also may be sold prior to expiration.11.An American put option allows the holder to A)buy the underlying asset at the striking price on or before the expiration date. B)sell the underlying asset at the striking price on or before the expiration date. C)potentially benefit from a stock price decrease with less risk than short selling the stock. D)B and C. E)A and C. Answer: D Difficulty: Easy Rationale: An American put option allows the buyer to sell the underlying asset at the striking price on or before the expiration date. The put option also allows the investor to benefit from an expected stock price decrease while risking only the amount invested in the contract.12.A European put option allows the holder to A)buy the underlying asset at the striking price on or before the expiration date. B)sell the underlying asset at the striking price on or before the expiration date. C)potentially benefit from a stock price decrease with less risk than short selling the stock. D)sell the underlying asset at the striking price on the expiration date. E)C and D. Answer: E Difficulty: Easy Rationale: A European put option allows the buyer to sell the underlying asset at the striking price on or before the expiration date. The put option also allows the investor to benefit from an expected stock price decrease while risking only the amount invested in the contract.13.An American put option can be exercised A)any time on or before the expiration date. B)only on the expiration date. C)any time in the indefinite future. D)only after dividends are paid. E)none of the above. Answer: A Difficulty: Easy Rationale: American options can be exercised on or before expiration date.14.An American call option can be exercised A)any time on or before the expiration date. B)only on the expiration date. C)any time in the indefinite future. D)only after dividends are paid. E)none of the above. Answer: A Difficulty: Easy Rationale: American options can be exercised on or before expiration date.15.A European call option can be exercised A)any time in the future. B)only on the expiration date. C)if the price of the underlying asset declines below the exercise price. D)immediately after dividends are paid. E)none of the above. Answer: B Difficulty: Easy Rationale: European options can be exercised at expiration only.16.A European put option can be exercised A)any time in the future. B)only on the expiration date. C)if the price of the underlying asset declines below the exercise price. D)immediately after dividends are paid. E)none of the above. Answer: B Difficulty: Easy Rationale: European options can be exercised at expiration only.17.To adjust for stock splits A)the exercise price of the option is reduced by the factor of the split and the number of option held is increased by that factor. B)the exercise price of the option is increased by the factor of the split and the number of option held is reduced by that factor. C)the exercise price of the option is reduced by the factor of the split and the number of option held is reduced by that factor. D)the exercise price of the option is increased by the factor of the split and the number of option held is increased by that factor. E)none of the above Answer: A Difficulty: Easy 18.All else equal, call option values are lower A)in the month of May. B)for low dividend payout policies. C)for high dividend payout policies. D)A and B. E)A and C. Answer: C Difficulty: Easy 19.The current market price of a share of AT&T stock is $50. If a call option on this stock has a strike price of $45, the call A)is out of the money. B)is in the money. C)sells for a higher price than if the market price of AT&T stock is $40. D)A and C. E)B and C. Answer: E Difficulty: Easy Rationale: If the striking price on a call option is less than the market price, the option is in the money and sells for more than an out of the money option.20.The current market price of a share of Boeing stock is $75. If a call option on this stock has a strike price of $70, the call A)is out of the money. B)is in the money. C)sells for a higher price than if the market price of Boeing stock is $70. D)A and C. E)B and C. Answer: E Difficulty: Easy Rationale: If the striking price on a call option is less than the market price, the option is in the money and sells for more than an at the money option.21.The current market price of a share of CSCO stock is $22. If a call option on this stock has a strike price of $20, the call A)is out of the money. B)is in the money. C)sells for a higher price than if the market price of CSCO stock is $21. D)A and C. E)B and C. Answer: E Difficulty: Easy Rationale: If the striking price on a call option is less than the market price, the option is in the money and sells for more than a less in the money option.22.The current market price of a share of Disney stock is $30. If a call option on this stock has a strike price of $35, the call A)is out of the money. B)is in the money. C)can be exercised profitably. D)A and C. E)B and C. Answer: A Difficulty: Easy Rationale: If the striking price on a call option is more than the market price, the option is out of the money and cannot be exercised profitably.23.The current market price of a share of CAT stock is $76. If a call option on this stock has a strike price of $76, the call A)is out of the money. B)is in the money. C)is at the money. D)A and C. E)B and C. Answer: C Difficulty: Easy Rationale: If the striking price on a call option is equal to the market price, the option is at the money.24.A put option on a stock is said to be out of the money if A)the exercise price is higher than the stock price. B)the exercise price is less than the stock price. C)the exercise price is equal to the stock price. D)the price of the put is higher than the price of the call. E)the price of the call is higher than the price of the put. Answer: B Difficulty: Easy Rationale: An out of the money put option gives the owner the right to sell the shares for less than market price.25.A put option on a stock is said to be in the money if A)the exercise price is higher than the stock price. B)the exercise price is less than the stock price. C)the exercise price is equal to the stock price. D)the price of the put is higher than the price of the call. E)the price of the call is higher than the price of the put. Answer: A Difficulty: Easy Rationale: An in the money put option gives the owner the right to sell the shares for more than market price.26.A put option on a stock is said to be at the money if A)the exercise price is higher than the stock price. B)the exercise price is less than the stock price. C)the exercise price is equal to the stock price. D)the price of the put is higher than the price of the call. E)the price of the call is higher than the price of the put. Answer: C Difficulty: Easy 27.A call option on a stock is said to be out of the money if A)the exercise price is higher than the stock price. B)the exercise price is less than the stock price. C)the exercise price is equal to the stock price. D)the price of the put is higher than the price of the call. E)the price of the call is higher than the price of the put. Answer: A Difficulty: Easy Rationale: An out of the money call option gives the owner the right to buy the shares for more than market price.28.A call option on a stock is said to be in the money if A)the exercise price is higher than the stock price. B)the exercise price is less than the stock price. C)the exercise price is equal to the stock price. D)the price of the put is higher than the price of the call. E)the price of the call is higher than the price of the put. Answer: B Difficulty: Easy Rationale: An in the money call option gives the owner the right to buy the shares for less than market price.29.A call option on a stock is said to be at the money if A)the exercise price is higher than the stock price. B)the exercise price is less than the stock price. C)the exercise price is equal to the stock price. D)the price of the put is higher than the price of the call. E)the price of the call is higher than the price of the put. Answer: C Difficulty: Easy 30.The current market price of a share of AT&T stock is $50. If a put option on this stock has a strike price of $45, the put A)is out of the money. B)is in the money. C)sells for a lower price than if the market price of AT&T stock is $40. D)A and C. E)B and C. Answer: D Difficulty: Easy Rationale: If the striking price on a put option is more than the market price, the option is out of the money and sells for less than an in the money option.31.The current market price of a share of Boeing stock is $75. If a put option on this stock has a strike price of $70, the put A)is out of the money. B)is in the money. C)sells for a higher price than if the market price of Boeing stock is $70. D)A and C. E)B and C. Answer: A Difficulty: Easy Rationale: If the striking price on a put option is more than the market price, the option is out of the money and sells for less than an at the money option.32.The current market price of a share of CSCO stock is $22. If a put option on this stock has a strike price of $20, the put A)is out of the money. B)is in the money. C)sells for a higher price than if the strike price of the put option was $25. D)A and C. E)B and C. Answer: D Difficulty: Easy Rationale: If the striking price on a put option is less than the market price, the option is out of the money and sells for less than an in the money option.33.The current market price of a share of Disney stock is $30. If a put option on this stock has a strike price of $35, the put A)is out of the money. B)is in the money. C)can be exercised profitably. D)A and C. E)B and C. Answer: A Difficulty: Easy Rationale: If the striking price on a put option is less than the market price, the option is out of the money.34.The current market price of a share of CAT stock is $76. If a put option on this stock has a strike price of $80, the put A)is out of the money. B)is in the money. C)can be exercised profitably. D)A and C. E)B and C. Answer: E Difficulty: Easy Rationale: If the striking price on a put option is less than the market price, the option is in the money and can be profitably exercised.35.Lookback options have payoffs that A)have payoffs that depend in part on the minimum or maximum price of the underlying asset during the life of the option. B)have payoffs that only depend on the minimum price of the underlying asset during the life of the option. C)have payoffs that only depend on the maximum price of the underlying asset during the life of the option. D)are known in advance. E)none of the above. Answer: A Difficulty: Easy 36.Barrier Options have payoffs that A)have payoffs that only depend on the minimum price of the underlying asset during the life of the option. B)depend both on the asset's price at expiration and on whether the underlying asset's price has cros