Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter1:IntroductionMultipleChoiceTestBank:Questions1.Aone-yearforwardcontractisanagreementwhereA.Onesidehastherighttobuyanassetforacertainpriceinoneyear’stime.B.Onesidehastheobligationtobuyanassetforacertainpriceinoneyear’stime.C.Onesidehastheobligationtobuyanassetforacertainpriceatsometimeduringthenextyear.D.Onesidehastheobligationtobuyanassetforthemarketpriceinoneyear’stime.2.WhichofthefollowingisNOTtrueA.WhenaCBOEcalloptiononIBMisexercised,IBMissuesmorestockB.AnAmericanoptioncanbeexercisedatanytimeduringitslifeC.AncalloptionwillalwaysbeexercisedatmaturityiftheunderlyingassetpriceisgreaterthanthestrikepriceD.Aputoptionwillalwaysbeexercisedatmaturityifthestrikepriceisgreaterthantheunderlyingassetprice.3.Aone-yearcalloptiononastockwithastrikepriceof$30costs$3;aone-yearputoptiononthestockwithastrikepriceof$30costs$4.Supposethatatraderbuystwocalloptionsandoneputoption.ThebreakevenstockpriceabovewhichthetradermakesaprofitisA.$35B.$40C.$30D.$364.Aone-yearcalloptiononastockwithastrikepriceof$30costs$3;aone-yearputoptiononthestockwithastrikepriceof$30costs$4.Supposethatatraderbuystwocalloptionsandoneputoption.ThebreakevenstockpricebelowwhichthetradermakesaprofitisA.$25B.$28C.$26D.$205.WhichofthefollowingisapproximatelytruewhensizeismeasuredintermsoftheunderlyingprincipalamountsorvalueoftheunderlyingassetsA.Theexchange-tradedmarketistwiceasbigastheover-the-countermarket.B.Theover-the-countermarketistwiceasbigastheexchange-tradedmarket.C.Theexchange-tradedmarketistentimesasbigastheover-the-countermarket.D.Theover-the-countermarketistentimesasbigastheexchange-tradedmarket.6.Whichofthefollowingbestdescribestheterm“spotprice”A.ThepriceforimmediatedeliveryB.ThepricefordeliveryatafuturetimeC.ThepriceofanassetthathasbeendamagedD.Thepriceofrentinganasset7.WhichofthefollowingistrueaboutalongforwardcontractA.ThecontractbecomesmorevaluableasthepriceoftheassetdeclinesB.Thecontractbecomesmorevaluableasthepriceoftheassetrise...
