QUESTION 1
1. A stock currently has a price of $100. You buy 1 put option on this stock for $100 per share. The exercise price of the option is $100 and the option expires in 1 year. In one year, the stock price is $500. What is your rate of return from the option contract?
Less than -50%
Between -50% and 150%
Between 150% and 250%
Between 250% and 350%
Between 350% and 450%
More than 450%
QUESTION 2
1. If you believe a stock is going to go up, should you buy a call or a put option?
Buy a call
Buy a put
QUESTION 3
1. What is the payoff to a put option with an exercise (strike) price of $100 if the price at expiration is $80?
-$20
$0
+$20
QUESTION 4
1. Apple’s current stock price is $269 and a call option with a strike price of $291.312 expiring in two years has a price of $23. Apple will pay a $5.10 dividend in one year. If the interest rate is 2%, what is the price implied by put-call parity for a put option with a $291.312 strike price that matures in two years?
Less than $25
Between $25 and $30
Between $30 and $35
Between $35 and $40
More than $40