Question 1
Which of the following statements is most correct?
A. An options value is determined by its exercise value, which is the market price of the stock less its
strike price. Thus, an option cant sell for more than its exercise value.
B. The potential loss on a call option increases as the underlying stock sells at higher and higher prices
because the profit margin gets bigger.
C. Issuing options provides companies with a low cost method of raising capital
D. The market value of an option depends in part on the options time to maturity and on the variability of
the underlying stocks price.<\/p>\n
Question 2
An analyst is interested in using the Black-Scholes model to value call options on the stock of QU, Inc.
The analyst has accumulated the following information:
Stock price
$40
Strike price
$40
Time until maturity
6 months
Standard deviation of the stock
12%
Risk free rate of return
16%<\/p>\n
Using the Black-Scholes model, what is the value of the call option?
A.<\/p>\n
$1.94<\/p>\n
B. $0.30
C. $3.76
D. $3.38
E. $2.12<\/p>\n
.
Question 3
A ______ is a contract that requires the holder to buy or sell a stated commodity at a specified price at a
specified time in the future.<\/p>\n
A. option
B. convertible contract
C. futures
D. warrant
.
Question 4
The intrinsic value of a call option equals __________.<\/p>\n
A.<\/p>\n
X-P0<\/p>\n
B. P0-X
C. c0-(P0-X)
D. p0-(X-P0)
.
Question 5
The price at which the stock or asset may be purchased from (or sold to) the option writer is referred to as
the __________.<\/p>\n
A. option premium
B. open interest
C. exercise value
D. strike price
.<\/p>\n
Question 6<\/p>\n
A stock is currently selling for $20. In three months (91 days), the stock price will be either $30 or $11. If
you are considering a call option for this stock with an exercise price of $21, what would be the value of
this option today? The risk free rate of return is 4.5%.<\/p>\n
A. $18.79
B. $4.32
C. $8.90
D. $9.23
.
4 points
Question 7
Googles closing price today was $501.71. You think its now a bargain, so youre looking to buy a call
option with a strike price of $600. Those LEAP things sound good, and you can get a call with an
expiration date of August 2015. If GOOGs standard deviation of returns is 25% annually and the risk-free
rate is 3.5%, what would be the value of the LEAP today?<\/p>\n
A. $49.05
B. $132.24
C. $57.73
D. $0
.
Question 8
What is the exercise value of a 6-month put option that has an exercise price of $50, a corresponding call
option value of $4.17 and a current market price of the underlying stock of $43.50? Assume that the annual
risk-free rate is 5 percent.
A. $0
B. $2.33
C. $9.44
D. $6.50
.
Question 9
You own a call option. The underlying common stock is selling for $15 and the options exercise price is<\/p>\n
$12. This option:<\/p>\n
A. must be sold to the call writer.
B. is out-of-the-money.
C. must be bought by the call holder.
D. is in-the-money.<\/p>\n
.
Question 10
Considering each action independently and holding other things constant, which of the following actions
would reduce a firm\u2019s need for additional capital?<\/p>\n
A. an increase in the dividend payout ratio<\/p>\n
B. a decrease in the profit margin<\/p>\n
C. a decrease in expected sales growth<\/p>\n
D. a decrease in the accrual accounts (accrued wages and taxes)<\/p>\n
.
Question 11
Which of the following statements is most correct?
A. One reason that companies tend to avoid stock repurchases is that dividend payments are taxed more
favorably than stock repurchases
B. One advantage of dividend reinvestment plans is that they allow shareholders to avoid paying taxes on
the dividends that they choose to reinvest
C. If a company announces a 2-for-1 stock split and the overall value of the firm remains unchanged, the
companys stock price must have doubled
D. None of the statements above is correct.<\/p>\n
.
Question 12
Which of the following lists events in chronological order from earliest to latest?
A. Date of Record, Declaration Date, Ex-dividend Date
B. Date of Record, Ex-dividend Date, Declaration Date
C. Declaration Date, Date of Record, Ex-dividend Date
D. Declaration Date, Ex-dividend Date, Date of Record
.
Question 13
How can a gold futures contract be used as a hedge against a potential decrease in the price of gold for a
firm that uses gold in making computer chips?
A. the company should sell gold futures contracts
B. the company should buy gold futures contracts
C. this would be a situation that shouldnt be hedged
D. the company should lower the price it pays for gold
.
Question 14
A futures trader who bets on the future direction of prices by taking either a long or a short position is
called a:
A. hedger
B. short seller
C. speculator
D. dealer
.
Question 15
Ledbetters Sweaters has a mutually exclusive project; to produce and sell wool sweaters or to produce and
sell cashmere sweaters. The investment into production of wool sweaters is $110,000. The investment into
cashmere sweaters is $125,000. The projects respective DCFs given future sales projections are:<\/p>\n
What is the NPV of the wool line?<\/p>\n
A.<\/p>\n
$41,000<\/p>\n
B. $6,000
C. $56,000
D. $21,000
.
Question 16
It is now August 2013 (in case you forgot). The cost to stage Pirates of the Caribbean on Ice is $3 million.
This cost wont be incurred until 2015. The company will stage the show in 2016 and 2017, generating
cash inflows of $2 million each year. In 2018, the show will be cancelled at an overall net cost of
$500,000. What is the IRR of this project?<\/p>\n
A. 14.36%
B. 21.53%
C. 10.17%
D. 12.7%
.
Question 17
The _____ designates the date on which the corporation lists the shareholders who are entitled to receive a
dividend payment.<\/p>\n
A. declaration date
B. ex-dividend date
C. date of record
D. payment date
.<\/p>\n
Question 18
What is the fundamental purpose of a stock split?<\/p>\n
A. A split shows the companys preference for retaining funds.
B. A split increases the threat of a hostile takeover.
C. A split immediately increases the investors wealth.
D. A split immediately brings the stock price to a lower trading range.
.
Question 19
Which of the following is a spontaneous source of financing?
A. accrued expenses
B. notes payable
C. common stock
D. retained earnings
.
Question 20
Which of the following accounts would not normally or be least likely to increase in proportion with a
planned increase in sale?
A. Accounts receivable
B. Inventory
C. Accounts payable
D. Accrued expenses
E. Notes payable
.<\/p>\n
Question 21
Which of the following dividend policies would cause dividends per share to fluctuate the least?
A.<\/p>\n
Constant Payout Ratio<\/p>\n
B. Constant Dollar
C.<\/p>\n
Small regular plus special<\/p>\n
D. Residual Dividend Method
.
Question 22
The first step involved in predicting a firms financial needs is
A. projecting the firms sales and expenses over the planning period
B. estimating the levels of investment in current and fixed assets that are necessary to support the
projected sales
C. determining the firms financing needs throughout the planning period
D. none of the above
.
Question 23
Which of the following is not consistent with the life cycle theory of a dividend policy?
A.<\/p>\n
In the maturing stage, a company should pay dividends<\/p>\n
B. In the infancy stage, a company should pay dividends
C. In the declining stage, a company should pay dividends
D. In the growth stage, a company could pay a low dividend
.<\/p>\n
Question 24
Norman Necktie Companys balance sheet showed the following as of December 31:<\/p>\n
Cash
$800<\/p>\n
Accounts payable
$350
Accounts receivable
450
Accruals
150
Inventory
950
Notes payable
2000
Total current assets
$2200
Total current liabilities
$2500
Net fixed assets
$34000
LT debt
$26500<\/p>\n
Common stock
3200<\/p>\n
Retained earnings
4000
Total assets
$36200
Total liabilities & equity
$36200
The company expects sales to double, from $10,000 to $20,000. Net income is anticipated to be $1000.
Current assets, accounts payable and accruals will grow in proportion to sales. There is no anticipated
change in net fixed assets. Will the company need any additional funds, if there are no dividends paid next
year? If so, how much?
A. No, $0
B. Yes, $7,700<\/p>\n
C. Yes, $1,700
D. Yes, $700
.
Question 25
Albany Motors recently completed a 3-for-1 stock split. Prior to the split, the company had 10 million
shares outstanding and its stock price was $150 per share. After the split, the total market value of the
companys stock equaled $1.5 billion. What was the price of the companys stock following the stock split?
A. $15
B. $45
C. $450
D. $50
E. $150<\/p>\n
Click here to have a similar paper done for you by one of our writers within the set deadline at a discounted<\/a>\u2026<\/i><\/p>\n","protected":false},"excerpt":{"rendered":" Question 1 Which of the following statements is most correct? A. An options value is determined by its exercise value, which is the market price of the stock less its strike price. Thus, an option cant sell for more than Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-181305","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/181305","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=181305"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/181305\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=181305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=181305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=181305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}