37
55) What is the put option premium given the following information?
Time (years)
0.5
Strike price
$
25.00
Stock price
$
24.50
Risk-free rate
2.00
%
Volatility
30
%
A) $1.20
B) $1.54
C) $1.82
D) $2.01
E) $2.21
38
56) Given a set of variables, the Black-Scholes option pricing formula has a call option delta of
0.496. What is the put delta given these same variables?
A) -1.496
B) -0.504
C) 0.504
D) 1.496
E) The answer cannot be determined based on the information provided.
57) Given a set of variables, the Black-Scholes option pricing formula has a put option delta of –
0.154. What is the call delta given these same variables?
A) -1.154
B) -0.846
C) 0.846
D) 1.154
E) The answer cannot be determined based on the information provided.
40
58) A stock is currently priced at $35 a share while the $40 put option is priced at $5.22. The put
option delta is -0.14. What is the approximate put price if the stock increases in value to $38?
A) $3.76
B) $4.47
C) $5.08
D) $5.27
E) $5.50
59) A stock is currently priced at $44 a share while the $45 call option is priced at $1.22. The
call option delta is 0.86. What is the approximate call price if the stock increases in value to $45?
A) $0.12
B) $0.26
C) $0.96
D) $1.98
E) $2.08
41
60) You have determined that you need -1,589 call options to hedge your stock portfolio. What
should you do based on this information?
A) buy 16 call option contracts
B) buy 1,589 call option contracts
C) write 16 call option contracts
D) write 160 call option contracts
E) write 1,589 call option contracts
61) You own 800 shares of Bradley Co. stock that is currently priced at $33 a share. Given this
price, the option delta for a $35 call option on this stock is 0.66. How many $35 call options do
you need to hedge against a -$1 change in the price of the stock?
A) buy 1,212 options
B) buy 1,813 options
C) buy 1,847 options
D) write 1,212 options
E) write 1,847 options
42
62) You own 1,500 shares of ABC stock that is currently priced at $27 a share. Given this price,
the option delta for a $25 call option on this stock is 0.724. How many $25 call options do you
need to hedge against a -$1 change in the price of the stock?
A) buy 1,500 options
B) buy 2,482 options
C) write 1,500 options
D) write 2,072 options
E) write 3,295 options
63) You own 4,800 shares of a stock that is currently priced at $34 a share. Given this price, the
option delta for a $30 call option on this stock is 0.955. How many $30 call option contracts do
you need to hedge against a -$1 change in the price of the stock?
A) buy 50 option contracts
B) buy 503 option contracts
C) write 50 option contracts
D) write 503 option contracts
E) write 5,026 option contracts
43
64) You own 5,000 shares of Miller stock which is currently valued at $37 a share. The $40 put
has a premium of $2.30 and a put delta of -0.25. What position should you take in $40 put
contracts to hedge your stock against a $1 decrease in price?
A) buy 200 contracts
B) buy 1,200 contracts
C) buy 20,000 contracts
D) write 200 contracts
E) write 1,200 contracts
65) You own 1,800 shares of Textile stock which is currently valued at $62 a share. The $65 put
has a premium of $4.26 and a put delta of -0.60. What position should you take in $65 put
contracts to hedge your stock against a $1 decrease in price?
A) buy 3 contracts
B) buy 30 contracts
C) buy 300 contracts
D) write 3 contracts
E) write 30 contracts
44
66) You have an equity portfolio valued at $1.55 million that has a beta of 1.21. You have
decided to hedge this portfolio using SPX call option contracts. The S&P 500 index is currently
1457. The option delta is 0.6435. How many option contracts must you write to effectively hedge
your portfolio?
A) 14 contracts
B) 18 contracts
C) 20 contracts
D) 25 contracts
E) 28 contracts
67) Laura has an equity portfolio valued at $11.25 million that has a beta of 1.27. She has
decided to hedge this portfolio using SPX call option contracts. The S&P 500 index is currently
1502. The option delta is 0.543. How many option contracts must Laura write to effectively
hedge her portfolio?
A) 37 contracts
B) 42 contracts
C) 175 contracts
D) 181 contracts
E) 191 contracts
45
68) You have been granted stock options on 300 shares of your employer’s stock. The stock is
currently selling for $37.80 and has a standard deviation of 30 percent. The option’s strike price
is $35 and the time to maturity is 10 years. What is the value of each option given a risk-free rate
of 3.0 percent? Assume that no dividends are paid.
A) $12.95
B) $14.47
C) $16.68
D) $18.39
E) $20.01
46
69) Mike was granted stock options on 1,000 shares of his employer’s stock. The stock is
currently selling for $27.70 a share and has a standard deviation of 36 percent. The option’s
strike price is $27.50 and the time to maturity is 10 years. What is the value of each option given
a risk-free rate of 3 percent? Assume that no dividends are paid.
A) $14.35
B) $15.67
C) $17.80
D) $20.15
E) $22.70
70) A stock with a current price of $43 will either move up by a factor of 1.20 or down by a
factor of 0.80 each period over the next two periods. The risk-free rate of interest is 3 percent.
What is the current value of a call option with a strike price of $45?
A) $4.38
B) $4.55
C) $4.72
D) $5.16
E) $5.27
48
49
71) What is the put option premium given the following information?
Time (years)
0.5
Strike price
$
35.00
Stock price
$
33.00
Risk-free rate
2.20
%
Volatility
35
%
A) $1.58
B) $2.01
C) $2.59
D) $3.96
E) $4.20
50
51
72) A stock is currently priced at $25 a share while the $30 put option is priced at $4.14. The put
option delta is -0.20. What is the approximate put price if the stock increases in value to $28?
A) $3.94
B) $4.97
C) $5.08
D) $5.27
E) $5.50
73) You own 2,500 shares of Jordan Co. stock which is currently valued at $38 a share. The $40
put has a premium of $2.25 and a put delta of -0.25. What position should you take in $40 put
contracts to hedge your stock against a $1 decrease in price?
A) buy 100 contracts
B) buy 1,000 contracts
C) buy 10,000 contracts
D) write 100 contracts
E) write 1,000 contracts
52
74) Lynn has an equity portfolio valued at $15 million that has a beta of 1.30. She has decided to
hedge this portfolio using SPX call option contracts. The S&P 500 index is currently 1602. The
option delta is 0.53. How many option contracts must Lynn write to effectively hedge her
portfolio?
A) 137 contracts
B) 142 contracts
C) 175 contracts
D) 191 contracts
E) 230 contracts