A. the change in the value of an option for a dollar change in the price of the underlying asset

04 Jun A. the change in the value of an option for a dollar change in the price of the underlying asset

Question
Part II, Ch 20

Question 9 of 20

An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $43. The call premium is $12. If the option has delta of .5, what is its elasticity?

A. 4.17

B. 2.32

C. 1.79

D. 0.5

E. 1.5

Question 10 of 20

Use the Black-Scholes Option Pricing Model for the following problem.

Given: SO= $70; X = $70; T = 70 days; r = 0.06 annually (0.0001648 daily); Std Dev = 0.020506 (daily).

No dividends will be paid before option expires. The value of the call option is _______.

A. $10.16

B. $5.16

C. $0.00

D. $2.16

E. none of the above

Question 11 of 20

What is the time value of the call? Refer To: 21-82

A. $8

B. $12

C. $6 (Got it from Internet Search, since information is not given E is the correct choice…….Take your call)

D. $4

E. cannot be determined without more information.

Question 12 of 20

If the hedge ratio for a stock call is 0.70, the hedge ratio for a put with the same expiration date and exercise price as the call would be _______.

A. 0.70

B. 0.30

C. -0.70

D. -0.30

E. -.17

Question 13 of 20

A. the change in the value of an option for a dollar change in the price of the underlying asset
Vega is defined as

A. the change in the value of an option for a dollar change in the price of the underlying asset.

B. the change in the value of the underlying asset for a dollar change in the call price.

C. the percentage change in the value of an option for a one percent change in the value of the underlying asset.

D. the change in the volatility of the underlying stock price.

E. the sensitivity of an option’s price to changes in volatility

Question 14 of 20

All the inputs in the Black-Scholes Option Pricing Model are directly observable except

A. the price of the underlying security.

B. the risk free rate of interest.

C. the time to expiration.

D. the variance of returns of the underlying asset return.

E. none of the above.

Question 15 of 20

Prior to expiration

A. the intrinsic value of a call option is greater than its actual value.

B. the intrinsic value of a call option is always positive.

C. the actual value of a call option is greater than the intrinsic value.

D. the intrinsic value of a call option is always greater than its time value.

E. none of the above.

Question 16 of 20

An American call option buyer on a non-dividend paying stock will