Financial Options(Financial Management And Financial Markets ) Questions and Answers

Question 1. According to the Black Scholes model, the stocks with the call option pays the
  1.    dividends
  2.    no dividends
  3.    current price
  4.    past price
Explanation:-
Answer: Option B. -> no dividends
Answer: (b).no dividends
Question 2. The yield on Treasury bill with a maturity is classified as a risk free rate but must be equal to an
  1.    option closing price
  2.    option beginning price
  3.    option expiration
  4.    option model
Explanation:-
Answer: Option C. -> option expiration
Answer: (c).option expiration
Question 3. An exercise of option in future and the part of option call value depends specifically on
  1.    PV of exercising cost
  2.    FV of exercising cost
  3.    PV of cost volatility
  4.    FV of cost volatility
Explanation:-
Answer: Option A. -> PV of exercising cost
Answer: (a).PV of exercising cost
Question 4. The long-term equity anticipation security is usually classified as
  1.    short-term options
  2.    long-term options
  3.    short money options
  4.    yearly call
Explanation:-
Answer: Option B. -> long-term options
Answer: (b).long-term options
Question 5. The types of option markets do not include
  1.    European option
  2.    American option
  3.    expiry option
  4.    covered options
Explanation:-
Answer: Option C. -> expiry option
Answer: (c).expiry option
Question 6. According to the Black Scholes model, the trading of securities and the stock prices move respectively
  1.    constant and randomly
  2.    randomly and constant
  3.    randomly and continuously
  4.    continuously and randomly
Explanation:-
Answer: Option D. -> continuously and randomly
Answer: (d).continuously and randomly
Question 7. The market value of the option which is out-of-money is
  1.    greater than zero
  2.    equal to zero
  3.    lesser than zero
  4.    equal to one
Explanation:-
Answer: Option A. -> greater than zero
Answer: (a).greater than zero
Question 8. In binomial approach of option pricing model, the last step for finding an option is
  1.    price hike
  2.    price value
  3.    put price
  4.    call price
Explanation:-
Answer: Option D. -> call price
Answer: (d).call price
Question 9. The type of options that do not have the stock in portfolio to back up the options is classified as
  1.    undue options
  2.    due options
  3.    naked options
  4.    total options
Explanation:-
Answer: Option C. -> naked options
Answer: (c).naked options
Question 10. The present value of portfolio is $900 and the current value of stock in portfolio is $1500 then the current option price would be
  1.    2400
  2.    −$600
  3.    −$2400
  4.    600
Explanation:-
Answer: Option D. -> 600
Answer: (d).600
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