In mid-September, the stock of Amazon.com, Inc. (AMZN) is selling for $147.A January call option on the stock is selling for $6.10 and has a strike price of $160. This call option is:
Answer(s): C
If Amazon.com is selling for $147 and the strike price on the option is $160, the call option is said to be out of the money since, even if an investor were given the option free, he would not benefit from exercising it at this time. If he did so, he would be paying $160 for a stock that is selling for only $147 on the open market. Even so, the option is not necessarily overpriced at $6.10 because the option has what is known as "time value" on it. The stock of Amazon.com has several months during which it could rise well above the $160 strike price on the option.
Which of the following payout options would provide an annuity owner with the biggest monthly check?
Answer(s): B
The straight life payout option would provide an annuity owner with the biggest monthly check. Under this option, the annuity payments stop upon the death of the owner. All of the other options would require that the insurance company stand ready to continue payments beyond the owner's death.This means more risk to the insurance company and, ergo, lower payments to the owner.
Mr. Fast Lane met an early death at the age of 42. Mr. Lane had been making contributions to a variable annuity contract for several years, and at the time of his death, his contributions totaled $25,000. Although the value of the contract had at one time reached $40,000, earnings included, a downturn in the market has resulted in a contract value of only $23,000.How much will Mr. Lane's beneficiaries receive as the death benefit associated with this contract under these circumstances?
Since Mr. Lane died while he was still making contributions, his beneficiaries will receive $25,000. If the annuitant dies during the accumulation period, the death benefit is equal to the value of the contract or the total of the contributions, whichever is greater.
Under the 1988 Insider and Securities Enforcement Act, a person convicted of insider trading can be subject to:
Answer(s): D
The 1988 Insider Trading and Securities Enforcement Act increased the penalties for a person convicted of insider trading to up to 10 years in prison and a fine of either $1 million or up to 3 times the amount of profits gained or losses avoided, whichever is greater.
The primary difference between dealers and brokers is that:
The primary difference between dealers and brokers is that dealers are market makers, who buy and sell out of their own inventory of securities, while brokers are matchmakers, who match buyers with sellers. Both dealers and brokers engage in primary and secondary market transactions, and both conduct trades in stocks, bonds, and options.
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