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49. Executive stock options are issued with the hope that the recipient will:
50. The major difference between options on real assets and options on financial assets is
that options on:
51. The option to abandon a project investing in real assets can be considered to have a
strike price equal to the:
52. Investors who hold warrants essentially have a:
53. The conversion ratio for a convertible bond equals the:
54. If a $1,000 convertible bond with a market value of $950 has a conversion ratio of 25
when the firm's stock is selling for $36 per share, then:
55. If a $1,000 convertible bond has a conversion ratio of 50 and the firm's equity is currently
selling for $22 per share, then the:
56. Which one of the following conditions will typically be present when a firm calls a bond
prior to maturity?
57. The value of a callable bond equals the value of a straight bond:
58. What is the value of a convertible bond with a conversion ratio of 25, face value of $1,000,
coupon rate of 10%, and yield to maturity of 10%? Common stock of this firm is currently selling
at $35.
59. Which one of the following statements is correct?
60. Stock options have been traded on exchanges since:
61. Which one of the following is correct for the owner of a June call, valued at $3, on XYZ
Corp. with a strike price of $60? XYZ Corp. currently trades at $55.
62. It is May 19 and you own a June European call on ABC Corp. with an exercise price of
$50. The option trades at $40 and ABC is trading at $86. What should you do?
63. At what point on the graph of possible values for a call option does the buyer break even
financially?
64. Which one of the following is correct for the owner of a September put, valued at $20, on
CBA Corp. with a strike price of $80? CBA currently trades at $67.
65. The buyer of a put option has a(n) _____ to sell the underlying asset and the option seller
has a(n) ____ to buy the underlying asset.
66. Joe sold a put option on ZZZ Corp. with an exercise price of $40 and a premium of $4.
The option expires tomorrow and ZZZ is currently trading at $28 per share. What will be Joe's
profit or loss per share if the option is exercised tomorrow and the price remains the same?
67. Jennifer sold a call option on XXX Corp. with an exercise price of $50 and a premium of
$3. The option expires today and XXX is currently trading at $40. What is Jennifer's expected
profit or loss per share?
68. The payoffs from investing in an option contract are designed so that:
69. Under what circumstance will the buyer of a put option be asked to fulfill her obligation?
70. Which one of the following statements is correct for an investor who has purchased
portfolio insurance by owning a stock and buying a put option on that stock?
71. A call option will have the highest value when the stock price is:
72. When does a change in the value of a call option come the closest to matching the price
change in a share of stock?
73. At what point is the payoff from owning a call option on a stock greater than the payoff
from owning the stock itself?
74. Calculate the return on exercising a put option that was purchased for $10, with an
exercise price of $85. The stock price at expiration is $81.
75. The value of a call option increases as the time to expiration increases because:
76. Stocks that have more volatile price changes have more valuable call options because
call holders:
77. Of the following four put options that can be purchased on a stock, which would you
expect to have the highest price? (All option months are in the same calendar year.)
78. A share of stock is currently priced at $20 and will change with equal likelihood to either
$55 or $15. A call option with a $25 exercise price is available on the stock. You want to borrow
funds to purchase the stock in order to replicate the call option. How many shares of stock must
be purchased to replicate one call option?
79. It has been determined that 0.5 share of stock should be purchased with borrowed funds
to replicate the payoff to one call option. What is the option's strike price if the stock could range
in value from $110 to $10 at the expiration of the option?
80. Firms spend an increasing amount of time evaluating real options, which are:
81. Corporations that attach warrants to their bonds are hoping to:
82. If a convertible bond can be thought of as a straight bond with a call option, then the call
is owned by the _____, and the strike price is the _____.
83. Why should a convertible bond always be valued at more than its bond value or its
conversion value up until maturity?
