Bus Combi Chapter 11

It is an option that gives the holder the right to buy

• purchased option

• written option

• call option

• put option

It is an option that gives the holder the right to sell.

• purchased option

• written option

• call option

• put option

It is a contract between two parties who agree to exchange future interest payments on a given loan amount; usually, one set of interest payments in based on a fixed interest rate and the other is based on a variable interest rate.

• interest rate option

• interest swap option

• foreign currency swap

• interest rate futures

Which of the following risks is inherent in an interest rate swap agreement?

• The risk of exchanging a lower interest rate for a higher interest rate.

• The risk of nonperformance by the counterparty to the agreement.

• a and b

• neither a nor b

It is a contract between two parties who agree to exchange sum of money in one currency for another currency.

• interest rate option

• interest rate swap

• foreign currency swap

• interest rate futures

If the strike price is greater than the market price, a put option is said to be

• out of the money

• in the money

• at the money

• in the monkey

If the strike price is greater than the market price, a call option is said to be

• out of the money

• in the money

• at the money

• in the monkey

Which of the following statements most likely describes an option rather than other types of derivatives?

• Requires payment only when exercised.

• Always traded on an exchange.

• Settled on a future date.

• Requires payment for the right obtained at the inception of the contract.

It refers to the amount paid to obtain a right under an option contract.

• strike price

• option premium

• notional amount

• underlying amount

This type of derivative protects the holder from unfavorable movements in prices while allowing the holder to benefit from favorable movements in prices?

• forward contract

• futures contract

• swap

• option