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1 | | When someone "writes" a call option, he/she has: |
| | A) | taken a "long" position in a futures contract. |
| | B) | "marked to market" a futures contract. |
| | C) | sold a call option. |
| | D) | bought a call option. |
| | E) | exercised a call option. |
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2 | | Bank-Ten promises to pay Bank-Nine a fixed rate of interest, on a $10 million dollar principal amount. In exchange for this, Bank-Nine promises to pay Bank-Ten a floating rate of interest on the same $10 million dollar principal. This is a/an: |
| | A) | call option contract |
| | B) | put option contract |
| | C) | interest rate swap |
| | D) | futures market transaction |
| | E) | collar |
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3 | | A futures contract will have its price adjusted each day of the contract's life—either up or down, depending on current market conditions. This is the essence of: |
| | A) | SEC requirements for futures contracts. |
| | B) | marking to market. |
| | C) | the "cheapest to deliver" option on a futures contract. |
| | D) | initial margin requirements changing on a daily basis. |
| | E) | maintenance margin requirements changing on a daily basis. |
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4 | | A call option exists on the stock of Macroswift Corporation. The exercise price is $45. Right now the call option can be purchased for $7. Macroswift stock is currently selling for $50 per share. What is the "intrinsic value" of the call option? |
| | A) | $7 |
| | B) | $0 |
| | C) | $3 |
| | D) | $2 |
| | E) | $5 |
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5 | | A call option exists on the stock of Macroswift Corporation. The exercise price is $45. Right now the call option can be purchased for $7. Macroswift stock is currently selling for $50 per share. What is the current "premium" on the call option? |
| | A) | $7 |
| | B) | $0 |
| | C) | $3 |
| | D) | $2 |
| | E) | $5 |
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6 | | A put option exists on the stock of Macroswift Corporation. The exercise price is $45. Right now the put option can be purchased for $1. Macroswift stock is currently selling for $50 per share. What is the "intrinsic value" of the put option? |
| | A) | $1 |
| | B) | $0 |
| | C) | $9 |
| | D) | $6 |
| | E) | $5 |
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7 | | In a call option contract, the price at which the option owner can buy the underlying stock is called the: |
| | A) | option's premium |
| | B) | option's exercise price |
| | C) | option's strike price |
| | D) | underlying asset's price |
| | E) | (b) and (c) |
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8 | | Mark entered into a "forward contract," to buy 100 shares of Way-Low Corp. stock, at a price of $5 per share—in exactly 6 months. Now, the six month period has passed. Way-Low Corp.'s stock is trading at $7 per share. What are the consequences for Mark? |
| | A) | He has lost $500 |
| | B) | He has gained $700 |
| | C) | He has lost $200 |
| | D) | He has gained $200 |
| | E) | He has gained $500 |
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9 | | The text shows some real stock option data, taken from a financial news source. One part of the data is labeled "open interest," which refers to: |
| | A) | the initial premium, when the option contract was first offered. |
| | B) | the premium at the start of the current trading day. |
| | C) | the number of contracts in existence at the opening of the trading day. |
| | D) | the number of contracts that were exercised on the current trading day. |
| | E) | the interest rate paid to finance option purchases. |
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10 | | Sally has entered into a contract whereby she made a promise to buy 100 shares of Mega Systems stock for $20 per share, anytime over the next three months—if another party elects to sell them. Sally has a: |
| | A) | long position in a call option |
| | B) | short position in a call option |
| | C) | long position in a futures contract |
| | D) | long position in a put option |
| | E) | short position in a put option |
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11 | | Ben purchased a call option on an "index" of stocks, and he is only permitted to exercise it on one specific date, six months from now. Ben has a/an: |
| | A) | short European option |
| | B) | long American option |
| | C) | short forward contract |
| | D) | long European option |
| | E) | short American option |
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12 | | A _________________ is one who tries to profit from in the futures market by taking positions for very short periods of time—perhaps just minutes. |
| | A) | scalper |
| | B) | long trader |
| | C) | short trader |
| | D) | forward trader |
| | E) | hedger |
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13 | | Last month, Mary bought a call option on ABC Corp. stock, having an exercise price of $30. Mary paid $1 for this call. Today, ABC stock is trading at $40 per share. Which of the following is true? |
| | A) | Mary has now realized a $10 profit. |
| | B) | Mary has now realized a $10 loss. |
| | C) | Mary's option is out of the money. |
| | D) | Mary's option is in the money. |
| | E) | Mary has now realized a $9 loss. |
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14 | | Two months ago, Mary bought a call option on ABC Corp. stock, having an exercise price of $30. Mary paid $1 for this call. Today, ABC stock is trading at $25 per share. Which of the following is true? |
| | A) | Mary has now realized a $5 profit. |
| | B) | Mary has now realized a $5 loss. |
| | C) | Mary's option is out of the money. |
| | D) | Mary's option is in the money. |
| | E) | Mary has now realized a $4 loss. |
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15 | | A call option's premium minus its intrinsic value is known as its: |
| | A) | exercise price |
| | B) | strike price |
| | C) | expiration value |
| | D) | time value |
| | E) | (a) and (b) |
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16 | | Forward contracts, futures contracts, and option contracts are all known as: |
| | A) | spot contracts |
| | B) | common stock securities |
| | C) | preferred contracts |
| | D) | credit securities |
| | E) | derivative securities |
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17 | | In order for Stan to enter into a futures contract, he was required to deposit some up-front funds. This is the __________________ requirement. |
| | A) | marking to market |
| | B) | cheapest to deliver |
| | C) | initial margin |
| | D) | open interest |
| | E) | leverage |
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18 | | With futures market contracts, _________________ guarantee(s) all trades, so that default risk is minimized. |
| | A) | position traders |
| | B) | an organized exchange |
| | C) | day traders |
| | D) | the CFTC |
| | E) | a floor broker |
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19 | | For a put option, the "intrinsic value" is either __________________ or zero. |
| | A) | the exercise price minus the underlying stock price |
| | B) | the underlying stock price |
| | C) | the time value |
| | D) | the underlying stock price minus the exercise price |
| | E) | the exercise price |
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20 | | _______________________ is the primary government regulator of futures markets in the U.S. |
| | A) | Federal Reserve |
| | B) | National Association of Securities Dealers |
| | C) | SEC |
| | D) | CBOE |
| | E) | CFTC |
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