James Jackson currently owns stock in PNG, Inc. , valued at $145 per share. Thinking that PNG is overbought and will decrease in price soon, Jackson writes a call option on PNG with an exercise price of $148 for a premium of $2.40. At expiration of the option, PNG stock is valued at $152 per share. What is the profit or loss from Jackson"s covered call strategy Jackson :
A. gained $5.40.
B. lost $4.60.
C. gained $9.40.
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Buying an interest-rate cap and selling an interest-rate floor is equivalent to:
A. buying a series of interest-rate calls and selling a series of interest-rate puts.
B. buying a series of interest-rate puts and selling a series of interest rate calls.
C. buying a series of interest-rate puts and calls.
Delbert Gossert owns stock worth $32 per share. Gossert buys a put option with a strike price of $32 for $2.50. At expiration, the stock is valued at $32 per share. The profit or loss from Gossert"s portfolio insurance strategy is a:
A. loss of $2.50.
B. $0, no gain or loss.
C. gain of $2.50.
An investor bought a 15 call for $14 on a stock trading at $20. If the stock is trading at $24 at option expiration, what is the profit and the value of the call at option expiration Profit Value of the Call ①A. - $5 $5 ②B. $4 - $5 ③C. - $5 $9
A. ①
B. ②
C. ③
Default risk in a forward contract:
A. only applies to the long, and is the probability that the short can not acquire the asset for delivery.
B. is the risk to either party that the other party will not fulfill their contractual obligation.
C. is lessened by the mark-to-market feature found in a typical forward contract.