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One reason for writing and selling a covered call option is




Question 1 (2.5 points);Question 1 Unsaved;One reason for writing and selling a covered call option is;Question 1 options;a) potential leverage;b) safety of principal;c) income received;d) liquidity;Save;Question 2 (2.5 points);Question 2 Unsaved;Call options, unlike warrants, may be written by individuals.;Question 2 options;a) True;b) False;Save;Question 3 (2.5 points);Question 3 Unsaved;If the price of an option to buy stock were to sell for less than its strike price, an opportunity for arbitrage exists.;Question 3 options;a) True;b) False;Save;Question 4 (2.5 points);Question 4 Unsaved;The most the individual who buys a put option can lose is the cost of the option.;Question 4 options;a) True;b) False;Save;Question 5 (2.5 points);Question 5 Unsaved;The intrinsic value of a put establishes the put's maximum price.;Question 5 options;a) True;b) False;Save;Question 6 (2.5 points);Question 6 Unsaved;A call is an option to;Question 6 options;a) sell stock at a specified price;b) buy stock at a specified price;c) deliver stock at a specified price;d) deliver bonds at a specified price;Save;Question 7 (2.5 points);Question 7 Unsaved;The profits (gains) on option trading are exempt from federal income taxation.;Question 7 options;a) True;b) False;Save;Question 8 (2.5 points);Question 8 Unsaved;Call options offer buyers;Question 8 options;a) potential leverage;b) liquidity;c) income;d) safety of principal;Save;Question 9 (2.5 points);Question 9 Unsaved;When a call option is exercised, new stock is issued.;Question 9 options;a) True;b) False;Save;Question 10 (2.5 points);Question 10 Unsaved;The maximum potential profit on a covered call is the time premium paid for the stock.;Question 10 options;a) True;b) False;Save;Question 11 (2.5 points);Question 11 Unsaved;If investors believe that a stock's prices will fluctuate but they are not certain as to the direction, these investors may buy a straddle.;Question 11 options;a) True;b) False;Save;Question 12 (2.5 points);Question 12 Unsaved;If the investor buys a bear spread, the individual anticipates;Question 12 options;a) higher interest rates;b) higher option prices;c) lower stock prices;d) lower put prices;Save;Question 13 (2.5 points);Question 13 Unsaved;If the investor buys a bull spread, the individual anticipates;Question 13 options;a) higher call price;b) higher stock prices;c) lower stock prices;d) lower call prices;Save;Question 14 (2.5 points);Question 14 Unsaved;If the investor anticipates that the price of a stock will fluctuate, this individual may;Question 14 options;a) sell a call and sell a put;b) buy a call and buy a put;c) buy a call and sell a put;d) sell a call and buy a put;Save;Question 15 (2.5 points);Question 15 Unsaved;The hedge ratio indicates the number of call options that is necessary to offset price movements in the underlying stock.;Question 15 options;a) True;b) False;Save;Question 16 (2.5 points);Question 16 Unsaved;According to the Black/Scholes option valuation model, a call option's value increases if;Question 16 options;a) stock prices increase and interest rates decrease;b) the time to expiration decreases and interest rates increase;c) the variability of the stock's return increases and stock prices increase;d) interest rates decrease and the variability of the stock's return increases;Save;Question 17 (2.5 points);Question 17 Unsaved;Writing both a put and a call at the same strike price and expiration date is an illustration of a straddle.;Question 17 options;a) True;b) False;Save;Question 18 (2.5 points);Question 18 Unsaved;The protective call strategy is an illustration of a short position.;Question 18 options;a) True;b) False;Save;Question 19 (2.5 points);Question 19 Unsaved;Put-call parity suggests that the sum of the prices of a stock, a call and a put on that stock, and a debt instrument maturing at the expiration of the options must equal zero.;Question 19 options;a) True;b) False;Save;Question 20 (2.5 points);Question 20 Unsaved;Buying a call and a treasury bill produces similar results as buying a stock and a put.;Question 20 options;a) True;b) False;Save;Additional Requirements;Level of Detail: Only answer needed


Paper#21120 | Written in 18-Jul-2015

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