| 1. Deeble Construction Co.'s stock is trading at $30 a share. Call options on the company's stock are also available, some with a strike price of $25 and some with a strike price of $35. Both options expire in three months. Which of the following best describes the value of these options? |
| 2. Suppose you believe that Delva Corporation's stock price is going to decline from its current level of $82.50 sometime during the next 5 months. For $510.25 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $85 per share. If you bought this option for $510.25 and Delva's stock price actually dropped to $60, what would your pre-tax net profit be? |
| 3. The exercise price on one of Flanagan Company's options is $15, its exercise value is $23, and its time value is $4. What are the option's market value and the price of the stock? |
| Market value | $ |
| Price of the stock | $ |
| 4. Which of the following statements is CORRECT? |
| 5. Which of the following statements is CORRECT? |
| 6. A call option on the stock of Bedrock Boulders has a market price of $6. The stock sells for $30 a share, and the option has an exercise price of $25 a share.What is the exercise value of the call option? |
| $ |
| What is the option's time value? |
| $ |
| 7. Call options on XYZ Corporation's common stock trade in the market. Which of the following statements is most correct, holding other things constant? |
| 8. The current price of a stock is $50, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $55 sells for $7.20. What is the value of a put option, assuming the same strike price and expiration date as for the call option? |
| 9. An option that gives the holder the right to sell a stock at a specified price at some future time is |
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excel_cengage_homework_week_7.xlsx
