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48) A 1-month $15 call option on BRU stock is priced at $1.45 while the 1-month $20 put option is
priced at $3.45. Which one of these is the best estimate of the current price of one share of BRU
stock?
A) $14.50
B) $16.50
C) $15.00
D) $16.00
E) $15.50
49) Jeanette just purchased 100 shares of HE stock along with a $30 put option contract on HE.
During the life of the option contract, the minimum value of her combined holdings will be
________ and the maximum value will be ________.
A) $0; $1,500.
B) $0; $3,000.
C) $1,500; $3,000
D) $0; Unlimited
E) $3,000; Unlimited
50) Robotic stock is selling for $68.90 a share. One $50 call contract is valued at $19.05, and one
$65 put contract is valued at $0.72. What is the per share intrinsic value of the put?
A) $0
B) $.72
C) $3.90
D) $3.18
E) $72.00
51) High Tower stock is selling for $32.08 a share, the $30 puts are priced at $.62, and the $30 calls
are priced at $2.36. How much will you receive if you write twenty $30 put option contracts?
A) $1,080
B) $1,240
C) $10.80
D) $12.40
E) $4,720
52) The 1-year $35 options on Water Kingdom stock are priced at $1.32 for the call and $.25 for
the put. The annual risk-free rate is 1.8 percent. What is the per share price of the underlying stock?
A) $33.59
B) $35.45
C) $36.40
D) $35.33
E) $34.41
53) The 3-month $40 options on Leeway Motors stock are priced at $.22 for the call and $1.54 for
the put. The risk-free rate is 0.3 percent per month. What is the per share price of the underlying
stock?
A) $41.79
B) $40.91
C) $40.23
D) $38.32
E) $39.14
54) IOU stock is selling for $39.40 a share. The 6-month $40 call costs $1.20. Risk-free assets are
currently returning 0.15 percent per month. What is the price of the 6-month $40 put?
A) $1.74
B) $.96
C) $1.03
D) $1.21
E) $1.44
55) A 4-month ABC $30 call is priced at $1.50 while the 4-month ABC put is priced at $2.20.
Risk-free assets are currently returning 0.25 percent per month. What is the price of ABC stock?
A) $29
B) $27
C) $31
D) $34
E) $30
56) Hilltop stock has a current market price of $58.10 a share. The 1-year $55 call is priced at
$3.75 while the 1-year $55 put is priced at $.42. What is the risk-free rate of return?
A) .42%
B) .87%
C) .48%
D) .76%
E) 1.09%
57) You purchased four TJH call option contracts with a strike price of $35 when the option was
quoted at $.68. The option expires today when the value of TJH stock is $36.90. Ignoring trading
costs and taxes, what is your total profit or loss on your investment?
A) $510.00
B) $488.00
C) $429.70
D) $620.00
E) $489.50
58) You purchased three WXO 15 call option contracts at a quoted price of $.44. What is your net
gain or loss on this investment if the price of WXO is $15.70 on the option expiration date?
A) −$132
B) −$116
C) $78
D) $54
E) $109
59) You wrote five call option contracts on MNO stock with a strike price of $25 and an option
price of $.70. What is your total net profit or loss on all transactions related to this investment if the
price of MNO is $24.70 on the option expiration date? Ignore taxes and transaction costs.
A) −$500
B) $350
C) −$350
D) $500
E) $425
60) The market price of Wild Ride stock has been very volatile, and you think this volatility will
continue for a few weeks. Thus, you decide to purchase a 1-month call option contract with a strike
price of $45 and an option price of $1.15. You also purchase a 1-month put option on the stock
with a strike price of $50 and an option price of $.95. What will be your total profit or loss on all
the transactions related to these option positions if the stock price is $44.40 on the day the options
expire?
A) $315
B) $290
C) −$210
D) $350
E) −$105
61) You wrote six put option contracts on Bakers Field stock with an exercise price of $30 and an
option price of $2.20. The stock price was $31.20 a share on the option expiration date. Ignoring
trading costs and taxes, what is your total net profit or loss on this investment?
A) −$1,320
B) $2,040
C) $1,320
D) $1,180
E) −$1,180
62) You sold a $25 put contract on EDF stock at an option price of $1.10. What does the stock
price have to be for you to break even on this contract?
A) $25.00
B) $23.90
C) $1.10
D) $26.10
E) $0
63) The $17.50 put option on ALF stock is priced at $.75. What is the total intrinsic value of one
option contract if the underlying stock is currently selling for $18 a share?
A) −$50
B) −$25
C) $0
D) $25
E) $50
64) Rita owns six put option contracts on Farmington stock with an exercise price of $27.50. What
is the total intrinsic value of these contracts if the stock is currently selling for $26.98 a share?
A) −$624
B) −$312
C) $0
D) $312
E) $624
65) A stock has a market value of $36.10 a share. The $35 call option is priced at $1.48. The
intrinsic value of this option is ________, and the time value is ________.
A) $1.10; $.38
B) $1.10; $1.48
C) $0; $1.48
D) $0; $.38
E) $0; $1.10
66) British Imports has a stock price of $38.62 a share. The $35 put is priced at $.15. The intrinsic
value of the put is ________, and the time value is ________.
A) $0; $1.65
B) $3.62; $.15
C) $0; $.15
D) $0; $3.62
E) $3.62; −$3.47
67) A stock is currently priced at $53.80 a share. One year from now, the stock price is expected to
be either $54 or $59 a share. The risk-free rate of return is 2 percent. What is the value of a 1-year
call option with an exercise price of $55?
A) $.75
B) $.81
C) $.45
D) $.69
E) $.51
68) Bruno's stock is currently selling for $31.74 a share but is expected to increase to either $32 or
$37 a share over the next year. The risk-free rate is 3 percent. What is the current value of a 1-year
call option with an exercise price of $35?
A) $.27
B) $.33
C) $.64
D) $.89
E) $.52
69) A stock is selling for $52 a share. The 3-month options have an exercise price of $55. The
risk-free rate is 3.2 percent, the standard deviation is 19 percent, and the d1 value is –0.4587. What
is the value of d2 as it applies to the Black-Scholes option pricing model?
A) −0.46081
B) −0.55370
C) −0.24601
D) −0.17069
E) −0.02307
70) High Mountain has a stock price of $31 a share. The 6-month options have a strike price of
$30. The risk-free rate is 3.1 percent and the standard deviation of returns is 26 percent. The value
of d1 is 0.35459. What is the value of d2 as it is used in the Black-Scholes option pricing model?
A) 0.19091
B) 0.23048
C) 0.17176
D) 0.19323
E) 0.17074
71) Wilt's has a stock price of $38 a share. The 9-month options have a strike price of $45. The
risk-free rate is 3.2 percent, the standard deviation is 21 percent, N(d1) is 0.23985 and N(d2) is
0.18710. What is the call price?
A) $.68
B) $.89
C) $1.03
D) $1.21
E) $1.17
72) The Whistle Stop has a stock price of $17 a share. One-year options have a strike price of $20.
The risk-free rate is 2.8 percent, the standard deviation is 29 percent, N(d1) is 0.37492 and N(d2) is
0.27131. What is the call price?
A) $1.18
B) $1.26
C) $.77
D) $1.37
E) $1.10
73) The 3-month options on XYZ stock have a strike price of $35 while the stock price is $43. The
risk-free rate is 3.15 percent, the standard deviation is 27 percent, N(d1) is 0.95060 and N(d2) is
0.93520. What is the call price?
A) $4.14
B) $4.72
C) $8.40
D) $6.56
E) $5.64
74) Valley Foods has a stock price of $34.92 a share. The 3-month options have a strike price of
$35. The risk-free rate is 4.2 percent, the standard deviation is 38 percent, N(d1) is 0.55497 and
N(d2) is 0.47935. What is the call price?
A) $2.03
B) $2.78
C) $2.69
D) $2.11
E) $2.47
75) The Bakery's assets are currently valued at $2,306. These assets are expected to be worth either
$2,100 or $2,600 one year from now. The company has a pure discount bond outstanding with a
$2,500 face value and a maturity date of 1 year. The risk-free rate is 2.6 percent. What is the value
of the equity in this firm?
A) $51.84
B) $31.42
C) $85.71
D) $105.15
E) $114.29
76) Ed's Sheds has a $1,250 pure discount bond that comes due in 1 year. The risk-free rate of
return is 3.1 percent. The firm's assets are expected to be worth either $1,100 or $1,500 in 1 year.
Currently, these assets are worth $1,360. What is the current value of the firm's debt?
A) $1,287.48
B) $1,293.85
C) $1,212.52
D) $1,153.85
E) $1,176.83
77) Katie D's has total assets valued at $3,160. These assets are expected to be worth either $2,900
or $3,300 by next year. One year from now, the company must repay a $3,100 pure discount bond.
The risk-free rate is 4.2 percent. What is the current value of the firm's debt?
A) $2,616.98
B) $2,971.55
C) $2,830.50
D) $2,886.79
E) $3,023.33
78) Benny's is reviewing a $462,000 project that is expected to increase the firm's equity by
$141,300 What is the project's delta?
A) 0.2889
B) 0.3058
C) 0.2948
D) 0.3103
E) 0.2701
79) Assume the delta of a call option on a firm's assets is 0.481. This means that a new $498,000
project will increase the value of equity by
A) $336,259
B) $349,725
C) $239,538
D) $280,790
E) $208,244
80) Allison's Market is currently valued at $68,400. The firm has a pure discount bond in the
amount of $50,000 that is due in 1 year. The risk-free rate is 3.2 percent. What is the minimum
value the firm must maintain if the shareholders are to exercise their call option on the firm in 1
year?
A) $50,000.00
B) $48,449.61
C) $51,600.00
D) $66,279.07
E) $70,588.80
