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41.
Employee stock options:
42.
The Sarbanes-Oxley Act of 2002 requires firms to report ESO grants within
how many days of the grant?
43.
Delta Importers has a pure discount loan with a face value of $180,000 due
in one year. The assets of the firm are currently worth $265,000. The
shareholders in this firm basically own a _____ option on the assets of the
firm with a strike price of _____.
44.
Jack and Jill are house hunting. They find House A situated on a hill. They
really like the house but want to continue searching the market for one
more week before making their final decision to buy the house. To avoid
having someone else purchase House A while they continue their house
hunting, they decide to place a $2,500 deposit on House A. This deposit will
apply to the purchase price if they buy House A. If they do not buy House A,
they will forfeit the $2,500. Essentially, Jack and Jill have a _____ on House
A.
45.
The option to wait:
I. may be of minimal value if a project is dependent upon rapidly changing
technology.
II. is partially dependent upon the discount rate applied to the project being
evaluated.
III. is defined as temporarily shutting down a project for a period of time.
IV. has a value equal to the NPV of a project if it is started at a later date
minus the NPV if the project is started today.
46.
Ignoring which of the following will cause the NPV of a project to be
underestimated?
I. option to abandon
II. option to expand
III. option to wait
IV. option to contract
47.
Which one of the following is an example of a strategic option for a
restaurant?
48.
Last month, Hill Side Markets introduced a new board game. Consumer
demand has been overwhelming and appears that strong demand will exist
over the long-term as young children absolutely love the game. Given this,
which one of the following options should Hill Side Markets consider in
respect to this game?
49.
Three months ago, Toy Town introduced a new toy for pre-school children.
The store expected this toy to be an instant success and a fast moving item.
To their surprise, children have zero interest in this toy so sales have been
abysmal. Which one of the following options should Toy Town consider in
respect to this toy?
50.
Which of the following are managerial options once a project is
commenced?
I. modifying the production process
II. re-pricing the product
III. revising the marketing plan
IV. modifying the product's color and shape
51.
Which one of the following statements related to warrants is correct?
52.
Which of the following statements is (are) correct concerning warrants?
I. Warrants are similar to put options.
II. Warrants are similar to call options.
III. When a warrant is exercised, the issuer is not involved in the transaction.
IV. When a warrant is exercised, the issuer must issue new shares of stock.
53.
When warrants are exercised, the:
54.
Which of the following statements are correct concerning convertible
bonds?
I. New shares of stock are issued when a convertible bond is converted.
II. A convertible bond is similar to a bond with a call option.
III. A convertible bond should always be worth less than a comparable
straight bond.
IV. A convertible bond can be described as having upside potential with
downside protection.
55.
The conversion value of a convertible bond is equal to which one of the
following?
56.
The maximum value of a convertible bond is theoretically:
57.
What is the cost of two November $25 put option contracts on Dove stock
given the following price quotes?
58.
What is the value of five August $25 call contracts on Dove stock?
59.
What is the intrinsic value of the November $25 call on Dove stock?
60.
You purchased six call option contracts on ABC stock with a strike price of
$32.50 when the option was quoted at $1.65. The option expires today when
the value of ABC stock is $34.60. Ignoring trading costs and taxes, what is
the net profit or loss on this investment?
