题目内容

A stock price (which pays no dividends) is $50 and the strike price of a two year European put option is $54. The risk-free rate is 3% (continuously compounded). Which of the following is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? ( )

A. $4.00
B. $3.86
C. $2.86
D. $0.86

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Which of the following is NOT true? Assume that present values are calculated from the end of the life of the option to today. ( )

An American put option is always worth less than the present value of the strike price
B. A European put option is always worth less than the present value of the strike price
C. A European call option is always worth less than the stock price
D. An American call option is always worth less than the stock price

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Which of the following creates a bear spread? ( )

A. Buy a low strike price put and sell a high strike price put
Buy a high strike price put and sell a low strike price put
C. Buy a high strike price call and sell a low strike price put
D. Buy a high strike price put and sell a low strike price call

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What is the number of different option series used in creating a butterfly spread? ( )

A. 1
B. 2
C. 3
D. 4

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In a binomial tree created to value an option on a stock, the expected return on stock is ( )

A. Zero
B. The return required by the market
C. The risk-free rate
D. It is impossible to know without more information

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A. $4.00 B. $3.86 C. $2.86 D. $0.86

Which of the following is NOT true? Assume that present values are calculated from the end of the life of the option to today. ( )

Which of the following creates a bear spread? ( )

What is the number of different option series used in creating a butterfly spread? ( )

In a binomial tree created to value an option on a stock, the expected return on stock is ( )

A. $4.00
B. $3.86
C. $2.86
D. $0.86