Exam (elaborations)
Fina 310 Test Questions And Answers Latest Update
- Module
- FIN 310
- Institution
- American Intercontinental University (AIU)
Fina 310 Test Questions And Answers Latest Update
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Solution 2024/2025Pepper
Fina 310 Test Questions And Answers Latest
Update
An order placed by an investor for the broker to buy an option at the best
available price is called a market order.
a. True
b. False ANS✔✔ t
The time value of a call is greatest when the stock price is very high.
a. True
b. False ANS✔✔ f
If a call is overpriced and you buy the call and sell short the stock, it is
equivalent to investing money at less than the risk-free rate.
a. True
b. False ANS✔✔ t
Most investors close their positions by exercising their options.
a. True
b. False ANS✔✔ f
The binomial probabilities are probabilities if investors were risk neutral.
a. True
b. False ANS✔✔ t
, Solution 2024/2025
Pepper
A put option increases in value when the stock price decreases.
a. True
b. False ANS✔✔ t
If there is one period remaining and no possibility of the option expiring in-
the-money, the hedge ratio will be zero.
a. True
b. False ANS✔✔ t
The law of one price states that the price of an asset cannot change.
a. True
b. False ANS✔✔ f
The absence of a daily settlement is one of the factors distinguishing a
forward contract from a futures contract.
a. True
b. False ANS✔✔ t
If a call is underpriced and you buy the call and sell short the stock, it is
equivalent to investing money at more than the risk-free rate.
a. True
b. False ANS✔✔ t
The lower the exercise price, the more valuable the call option.
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