Stock Options Quiz

What are the factors affecting stock options?

• Interest Rates, Dividends, Stock Price, Time to Expiration

• Volatility, Risk-free interest rate, Dividends, Strike Prices

• Time to Expiration, Stock Price, Volatility, Risk-free interest rate

• Strike Prices, Dividends, Volatility, Time to Expiration

What is the main difference between a Call option and a Put option?

• Call option has unlimited upside potential, Put option has limited upside potential

• Call option benefits from price increases, Put option benefits from price decreases

• Call option benefits from price decreases, Put option benefits from price increases

• Call option has limited downside risk, Put option has unlimited downside risk

Which factor affects the price of an option in a less clear-cut way?

• Volatility of stock price

• Time to Expiration

• Risk-free interest rate

• Dividends

What is the effect of dividends on the value of call and put options?

• Dividends increase the value of call options and decrease the value of put options

• Dividends decrease the value of call options and increase the value of put options

• Dividends have no effect on the value of call and put options

• Dividends increase the value of both call and put options

What is the lower bound for European Call Option Prices with no dividends?

• c ≥ max(S0 – Ke –rT, 0)

• c ≤ max(S0 – Ke –rT, 0)

• c = max(S0 – Ke –rT, 0)

• c < max(S0 – Ke –rT, 0)

When is there an arbitrage opportunity for a Put option?

• When p ≤ max(Ke –rT – S0, 0)

• When p = max(Ke –rT – S0, 0)

• When p ≥ max(Ke –rT – S0, 0)

• When p < max(Ke –rT – S0, 0)

What is the main difference between American and European Options?

• American option is worth at least as much as European option

• American option is worth less than European option

• American option is worth more than European option

• American option is worth the same as European option

What is the exception to early exercise for American options?

• American put on a dividend-paying stock

• American call on a dividend-paying stock

• American call on a non-dividend paying stock

• American put on a non-dividend paying stock

What is the formula for the lower bound of European Put Prices with no dividends?

• p < max(Ke –rT – S0, 0)

• p = max(Ke –rT – S0, 0)

• p ≤ max(Ke –rT – S0, 0)

• p ≥ max(Ke –rT – S0, 0)

What is the main benefit of owning a Call option?

• Limited upside potential

• Limited downside risk

• Unlimited downside risk

• Unlimited upside potential