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1
A) The lower bound on the price of a call option on stock could be zero. B) The lower bound on the price of a call option on stock is the price of the stock. C) To prevent arbitrage, the value of the call today must be less than the stock price minus the exercise price. D) After expiration, an option on stock will be worth more than the option's intrinsic value. E) The upper bound on the price of a call option is its intrinsic value. 2
A) I and III only B) II and IV only C) I, II, III, and IV D) I, II and III only E) II, III, and IV only 3
A) Sell puts on Jet-Electro stock. B) Buy warrants on Jet-Electro stock. C) Buy Jet-Electro convertible bonds. D) Sell calls on Jet-Electro stock. E) Buy Jet-Electro stock. 4
A) exercise price; intrinsic value B) value of the underlying asset; exercise price C) exercise price; value of the underlying asset D) value of the underlying asset; intrinsic value E) value of the risk-free asset; exercise price 5
A) 33% B) 25% C) 20% D) 11% E) 10% 6
A) $782.59 B) $788.92 C) $792.64 D) $800.00 E) $842.64 7
A) $88.20 B) $93.40 C) $91.60 D) $98.40 E) $96.00 8
A) $1,000.00 B) $921.12 C) $900.00 D) $880.22 E) $848.37 9
A) 7.5% B) 7.0% C) 6.0% D) 13.0% E) 11.0% 10
A) $0 B) $150 C) $50 D) $25 E) $200
2002 McGraw-Hill Higher Education