Chapter 20 Options Markets: Introduction Answer Key
Multiple Choice Questions
1.
The price that the buyer of a call option pays to acquire the option is called the
2.
The price that the writer of a call option receives to sell the option is called the
3.
The price that the buyer of a put option pays to acquire the option is called the
4.
The price that the writer of a put option receives to sell the option is called the
5.
The price that the buyer of a call option pays for the underlying asset if she executes her
option is called the
6.
The price that the writer of a call option receives for the underlying asset if the buyer
executes her option is called the
7.
The price that the buyer of a put option receives for the underlying asset if she executes
her option is called the
8.
The price that the writer of a put option receives for the underlying asset if the option is
exercised is called the
9.
An American call option allows the buyer to
10.
A European call option allows the buyer to
11.
An American put option allows the holder to
12.
A European put option allows the holder to
13.
An American put option can be exercised
14.
An American call option can be exercised
15.
A European call option can be exercised
16.
A European put option can be exercised
17.
To adjust for stock splits
18.
All else equal, call option values are lower
19.
All else equal, call option values are higher
20.
The current market price of a share of AT&T stock is $50. If a call option on this stock has
a strike price of $45, the call
21.
The current market price of a share of Boeing stock is $75. If a call option on this stock has
a strike price of $70, the call
22.
The current market price of a share of CSCO stock is $22. If a call option on this stock has
a strike price of $20, the call
23.
The current market price of a share of Disney stock is $60. If a call option on this stock has
a strike price of $65, the call
24.
The current market price of a share of CAT stock is $76. If a call option on this stock has a
strike price of $76, the call
25.
The current market price of a share of MOT stock is $24. If a call option on this stock has a
strike price of $24, the call
26.
The current market price of a share of IBM stock is $195. If a call option on this stock has a
strike price of $195, the call
27.
A put option on a stock is said to be out of the money if
28.
A put option on a stock is said to be in the money if
29.
A put option on a stock is said to be at the money if
30.
A call option on a stock is said to be out of the money if
31.
A call option on a stock is said to be in the money if
32.
A call option on a stock is said to be at the money if
33.
The current market price of a share of JNJ stock is $60. If a put option on this stock has a
strike price of $55, the put