Free CMA Exam Braindumps (page: 158)

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Which of the following is exercisable on at the expiration date?

  1. Coleopteran.
  2. European opinion
  3. American option.
  4. Put option.

Answer(s): B

Explanation:

An American option is a contractual arrangement that gives the owner the right to buy or sell an asset at a fixed pence at ark moment in flume before or on a specified date. A European option is exercisable one at the expiration date



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It Up is the value of a put option. V is the vatic of a call option, V8 is the value of the stock, and PVE is the present value of the exercise pence, what is the formula for the put- call panty theorem for European options?

  1. V8:PVE-VpVC
  2. Vg+Vp-VC=PVE
  3. VS+PVE=VPVC
  4. PVE=VS-Vp-VC

Answer(s): B

Explanation:

For European options, given market equilibrium for all relevant paces (no arbitrage possibilities), equal exercise prices for the put and the can, and the same expiration date, the put-call panty theorem states that a fixed relationship applies to the market values of the put and call options on a secant. For example, a strategy of selling one call option, buying one share of the stock, and bang one put option should result in a ask-free return. The gain (loss) from the stock and the put should equal the gain (loss) on the call). If Vs is the value of the stock. Vp is the value of the put, `Ic is the value of the call, and PVE is the present value of the exercise price (the time interval is the time to expiration), the formula for put-call parity may be stated as :follows Vs + Vp -- V = PVE



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A distancing Tift of futures Ont1&t is that

  1. Performance is delayed,
  2. It is a hedge, not a speculation.
  3. Delivery is to be on a specific day
  4. The price is marked to market each day.

Answer(s): D

Explanation:

A dish anguishing feature of futures contracts is that their prices are marked to market every day at the close of the day. Thus, the market price is posted at the close of business each day. A mark-to-market provision minimizes a futures contracts chance of default because profits and losses on the contracts must be received or paid each day through a clean in-house.



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You are currently lording a call option on a stock with an exercise pence of $100. If the current stock pence is $90, your net proceeds by exerting this option will be

  1. $(10)
  2. $10
  3. $0
  4. $90

Answer(s): A

Explanation:

If the market price is less than the exercise price, the option is considered to be "out of the money" because the call owner ordinarily would not exercise the option (it would resift in a loss) Pa'anga $100 for a $90 stock would result in negative proceeds of $10.



Page 158 of 336



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