1、投资学第7版TestBank答案21投资学第7版Test-Bank答案21Multiple Choice Questions 1. Before expiration, the time value of an in the money call option is always A) equal to zero. B) positive. C) negative. D) equal to the stock price minus the exercise price. E) none of the above. Answer: B Difficulty: Easy Rationale: T
2、he difference between the actual option price and the intrinsic value is called the time value of the option. 2. Before expiration, the time value of an in the money put option is always A) equal to zero. B) negative. C) positive. D) equal to the stock price minus the exercise price. E) none of the
3、above. Answer: C Difficulty: Easy Rationale: The difference between the actual option price and the intrinsic value is called the time value of the option. 3. Before expiration, the time value of an at the money call option is always A) positive. B) equal to zero. C) negative. D) equal to the stock
4、price minus the exercise price. E) none of the above. Answer: A Difficulty: Easy Rationale: The difference between the actual option price and the intrinsic value is called the time value of the option. 4. Before expiration, the time value of an at the money put option is always A) equal to zero. B)
5、 equal to the stock price minus the exercise price. C) negative. D) positive. E) none of the above. Answer: D Difficulty: Easy Rationale: The difference between the actual option price and the intrinsic value is called the time value of the option. 5. A call option has an intrinsic value of zero if
6、the option is A) at the money. B) out of the money. C) in the money. D) A and C. E) A and B. Answer: E Difficulty: Easy Rationale: Intrinsic value can never be negative; thus it is set equal to zero for out of the money and at the money options. 6. A put option has an intrinsic value of zero if the
7、option is A) at the money. B) out of the money. C) in the money. D) A and C. E) A and B. Answer: E Difficulty: Easy Rationale: Intrinsic value can never be negative; thus it is set equal to zero for out of the money and at the money options. 7. Prior to expiration A) the intrinsic value of a call op
8、tion is greater than its actual value. B) the intrinsic value of a call option is always positive. C) the actual value of call option is greater than the intrinsic value. D) the intrinsic value of a call option is always greater than its time value. E) none of the above. Answer: C Difficulty: Modera
9、te Rationale: Prior to expiration, any option will be selling for a positive price, thus the actual value is greater than the intrinsic value. 8. Prior to expiration A) the intrinsic value of a put option is greater than its actual value. B) the intrinsic value of a put option is always positive. C)
10、 the actual value of put option is greater than the intrinsic value. D) the intrinsic value of a put option is always greater than its time value. E) none of the above. Answer: C Difficulty: Moderate Rationale: Prior to expiration, any option will be selling for a positive price, thus the actual val
11、ue is greater than the intrinsic value. 9. If the stock price increases, the price of a put option on that stock _ and that of a call option _. A) decreases, increases B) decreases, decreases C) increases, decreases D) increases, increases E) does not change, does not change Answer: A Difficulty: Mo
12、derate Rationale: As stock prices increases, call options become more valuable (the owner can buy the stock at a bargain price). As stock prices increase, put options become less valuable (the owner can sell the stock at a price less than market price). 10. If the stock price decreases, the price of
13、 a put option on that stock _ and that of a call option _. A) decreases, increases B) decreases, decreases C) increases, decreases D) increases, increases E) does not change, does not change Answer: C Difficulty: Moderate Rationale: As stock prices decreases, call options become less valuable (the o
14、wner can buy the stock at a bargain price). As stock prices decreases, put options become more valuable (the owner can sell the stock at a price less than market price). 11. Other things equal, the price of a stock call option is positively correlated with the following factors except A) the stock p
15、rice. B) the time to expiration. C) the stock volatility. D) the exercise price. E) none of the above. Answer: D Difficulty: Moderate Rationale: The exercise price is negatively correlated with the call option price. 12. Other things equal, the price of a stock put option is positively correlated wi
16、th the following factors except A) the stock price. B) the time to expiration. C) the stock volatility. D) the exercise price. E) none of the above. Answer: A Difficulty: Moderate Rationale: The exercise price is negatively correlated with the stock price. 13. The price of a stock put option is _ co
17、rrelated with the stock price and _ correlated with the striking price. A) positively, positively B) negatively, positively C) negatively, negatively D) positively, negatively E) not, not Answer: B Difficulty: Moderate Rationale: The lower the stock price, the more valuable the call option. The high
18、er the striking price, the more valuable the put option. 14. The price of a stock call option is _ correlated with the stock price and _ correlated with the striking price. A) positively, positively B) negatively, positively C) negatively, negatively D) positively, negatively E) not, not Answer: D D
19、ifficulty: Moderate Rationale: The lower the stock price, the more valuable the call option. The higher the striking price, the more valuable the put option. 15. All the inputs in the Black-Scholes Option Pricing Model are directly observable except A) the price of the underlying security. B) the ri
20、sk free rate of interest. C) the time to expiration. D) the variance of returns of the underlying asset return. E) none of the above. Answer: D Difficulty: Moderate Rationale: The variance of the returns of the underlying asset is not directly observable, but must be estimated from historical data,
21、from scenario analysis, or from the prices of other options. 16. Delta is defined as A) the change in the value of an option for a dollar change in the price of the underlying asset. B) the change in the value of the underlying asset for a dollar change in the call price. C) the percentage change in
22、 the value of an option for a one percent change in the value of the underlying asset. D) the change in the volatility of the underlying stock price. E) none of the above. Answer: A Difficulty: Moderate Rationale: An options hedge ratio (delta) is the change in the price of an option for $1 increase
23、 in the stock price. 17. A hedge ratio of 0.70 implies that a hedged portfolio should consist of A) long 0.70 calls for each short stock. B) short 0.70 calls for each long stock. C) long 0.70 shares for each short call. D) long 0.70 shares for each long call. E) none of the above. Answer: C Difficul
24、ty: Moderate Rationale: The hedge ratio is the slope of the option value as a function of the stock value. A slope of 0.70 means that as the stock increases in value by $1, the option increases by approximately $0.70. Thus, for every call written, 0.70 shares of stock would be needed to hedge the in
25、vestors portfolio. 18. A hedge ratio for a call option is _ and a hedge ratio for a put option is _. A) negative, positive B) negative, negative C) positive, negative D) positive, positive E) zero, zero Answer: C Difficulty: Moderate Rationale: Call option hedge ratios must be positive and less than
26、 1.0, and put option ratios must be negative, with a smaller absolute value than 1.0. 19. A hedge ratio for a call is always A) equal to one. B) greater than one. C) between zero and one D) between minus one and zero. E) of no restricted value Answer: C Difficulty: Moderate Rationale: See rationale
27、for test bank question 21.18. 20. A hedge ratio for a put is always A) equal to one. B) greater than one. C) between zero and one D) between minus one and zero. E) of no restricted value Answer: D Difficulty: Moderate Rationale: See rationale for test bank question 21.18. 21. The dollar change in th
28、e value of a stock call option is always A) lower than the dollar change in the value of the stock. B) higher than the dollar change in the value of the stock. C) negatively correlated with the change in the value of the stock. D) B and C. E) A and C. Answer: A Difficulty: Moderate Rationale: The sl
29、ope of the call option valuation function is less than one. 22. The percentage change in the stock call option price divided by the percentage change in the stock price is called A) the elasticity of the option. B) the delta of the option. C) the theta of the option. D) the gamma of the option. E) n
30、one of the above. Answer: A Difficulty: Moderate Rationale: Option price elasticity measures the percent change in the option price as a function of the percent change in the stock price. 23. The elasticity of a stock call option is always A) greater than one. B) smaller than one. C) negative. D) in
31、finite. E) none of the above. Answer: A Difficulty: Moderate Rationale: Option prices are much more volatile than stock prices, as option premiums are much lower than stock prices. 24. The elasticity of a stock put option is always A) positive. B) smaller than one. C) negative D) infinite E) none of the above. Answer: C Difficu
