12. What is the intrinsic value for a CISCO Jan 50 put option when the current m
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Question
12. What is the intrinsic value for a CISCO Jan 50 put option when the current market price ofa CISCO share is 40? a. 0 b. -10 c. 10 d. 50 e. none of the above 13. The lower the riskless interest rate, the will be the premium on a call option. a. higher b. lower c. not sure 14. Which of the following describes normal backwardation? a. Speculators are net long and hedgers are net short b. Speculators are net short and hedgers are net long c. Futures price is expected to rise over time d. Futures price is expected to fall over time e. a and c f. f. a and d g. b andc h. b and d 15. According to the cost-of-carry model basis should always be positive. basis should always be negative. basis can be positive or negative. all of the above. none of the above. a. b. c. d. e. 16·The initial value of a futures contract is a. the futures price b. zero. 17. A trader is on the short side of a futures contract. He loses money when the futures price goes a. up b. down. 18. Suppose on today, October 31, the cash price of gold is $270 (per ounce) the price of December gold futures contract, expiring on December 31, is $285. The annualized lending/borrowing rate is 5%/7% and the annualized cost of storing gold is 2%. Is there an arbitrage opportunity? a. No b. Yes. 19. The following are the end-of-period (or expiration day) cashflow projections of investments A, B, C, D, and E within a single-period binomial framework. The beta of A is 1, the market price of B is $100, the market price of A is at equilibrium, and the market price of beta is 6%;Explanation / Answer
12.
A Put Option is In-The-Money when the strike price is greater than the market price.
Intrinsic value of Put = strike price - stock price
= $50 - $40
= $10.
Intrinsic value of Put is $10.
option (C) is correct answer.
13.
The lower the riskless interest rate the lower Will be the premium on call option.
Option (B) is correct answer.
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