{"id":115527,"date":"2023-08-24T12:07:39","date_gmt":"2023-08-24T12:07:39","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=115527"},"modified":"2023-08-24T12:07:41","modified_gmt":"2023-08-24T12:07:41","slug":"test-bank-for-options-futures-and-other-derivatives-9th-edition-hull-all-chapters-1-26-full-complete-2023","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2023\/08\/24\/test-bank-for-options-futures-and-other-derivatives-9th-edition-hull-all-chapters-1-26-full-complete-2023\/","title":{"rendered":"Test Bank for Options Futures And Other Derivatives 9th Edition Hull \/ All Chapters 1 – 26 \/ Full Complete 2023"},"content":{"rendered":"\n

Options Futures And Other Derivatives 9th Edition Hull
Test Bank
Hull: Options, Futures, and Other Derivatives, Ninth Edition
Chapter 1: Introduction
Multiple Choice Test Bank: Questions with Answers<\/p>\n\n\n\n

    \n
  1. A one-year forward contract is an agreement where
    A. One side has the right to buy an asset for a certain price in one year\u2019s time.
    B. One side has the obligation to buy an asset for a certain price in one year\u2019s time.
    C. One side has the obligation to buy an asset for a certain price at some time during the
    next year.
    D. One side has the obligation to buy an asset for the market price in one year\u2019s time.
    Answer: B
    A one-year forward contract is an obligation to buy or sell in one year\u2019s time for a
    predetermined price. By contrast, an option is the right to buy or sell.<\/li>\n\n\n\n
  2. Which of the following is NOT true
    A. When a CBOE call option on IBM is exercised, IBM issues more stock
    B. An American option can be exercised at any time during its life
    C. An call option will always be exercised at maturity if the underlying asset price is greater
    than the strike price
    D. A put option will always be exercised at maturity if the strike price is greater than the
    underlying asset price.
    Answer: A
    When an IBM call option is exercised the option seller must buy shares in the market to sell to
    the option buyer. IBM is not involved in any way. Answers B, C, and D are true.<\/li>\n\n\n\n
  3. A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the
    stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put
    option. The breakeven stock price above which the trader makes a profit is
    A. $35
    B. $40
    C. $30
    D. $36
    Answer: A
    When the stock price is $35, the two call options provide a payoff of 2\u00d7(35\u221230) or $10. The put
    option provides no payoff. The total cost of the options is 2\u00d73+ 4 or $10. The stock price in A,
    $35, is therefore the breakeven stock price above which the position is profitable because it is
    the price for which the cost of the options equals the payoff.<\/li>\n\n\n\n
  4. A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the
    stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put<\/li>\n<\/ol>\n\n\n\n

    option. The breakeven stock price below which the trader makes a profit is
    A. $25
    B. $28
    C. $26
    D. $20
    Answer: D
    When the stock price is $20 the two call options provide no payoff. The put option provides a
    payoff of 30\u221220 or $10. The total cost of the options is 2\u00d73+ 4 or $10. The stock price in D, $20,
    is therefore the breakeven stock price below which the position is profitable because it is the
    price for which the cost of the options equals the payoff.<\/p>\n\n\n\n

      \n
    1. Which of the following is approximately true when size is measured in terms of the underlying
      principal amounts or value of the underlying assets
      A. The exchange-traded market is twice as big as the over-the-counter market.
      B. The over-the-counter market is twice as big as the exchange-traded market.
      C. The exchange-traded market is ten times as big as the over-the-counter market.
      D. The over-the-counter market is ten times as big as the exchange-traded market.
      Answer: D
      The OTC market is about $600 trillion whereas the exchange-traded market is about $60 trillion.<\/li>\n\n\n\n
    2. Which of the following best describes the term \u201cspot price\u201d
      A. The price for immediate delivery
      B. The price for delivery at a future time
      C. The price of an asset that has been damaged
      D. The price of renting an asset
      Answer: A
      The spot price is the price for immediate delivery. The futures or forward price is the price for
      delivery in the future<\/li>\n\n\n\n
    3. Which of the following is true about a long forward contract
      A. The contract becomes more valuable as the price of the asset declines
      B. The contract becomes more valuable as the price of the asset rises
      C. The contract is worth zero if the price of the asset declines after the contract has been
      entered into
      D. The contract is worth zero if the price of the asset rises after the contract has been
      entered into
      Answer: B<\/li>\n<\/ol>\n\n\n\n

      A long forward contract is an agreement to buy the asset at a predetermined price. The contract
      becomes more attractive as the market price of the asset rises. The contract is only worth zero
      when the predetermined price in the forward contract equals the current forward price (as it
      usually does at the beginning of the contract).<\/p>\n\n\n\n

        \n
      1. An investor sells a futures contract an asset when the futures price is $1,500. Each contract is on
        100 units of the asset. The contract is closed out when the futures price is $1,540. Which of the
        following is true
        A. The investor has made a gain of $4,000
        B. The investor has made a loss of $4,000
        C. The investor has made a gain of $2,000
        D. The investor has made a loss of $2,000
        Answer: B
        An investor who buys (has a long position) has a gain when a futures price increases. An investor
        who sells (has a short position) has a loss when a futures price increases.<\/li>\n\n\n\n
      2. Which of the following describes European options?
        A. Sold in Europe
        B. Priced in Euros
        C. Exercisable only at maturity
        D. Calls (there are no European puts)
        Answer: C
        European options can be exercised only at maturity. This is in contrast to American options
        which can be exercised at any time. The term \u201cEuropean\u201d has nothing to do with geographical
        location, currencies, or whether the option is a call or a put.<\/li>\n\n\n\n
      3. Which of the following is NOT true
        A. A call option gives the holder the right to buy an asset by a certain date for a certain
        price
        B. A put option gives the holder the right to sell an asset by a certain date for a certain
        price
        C. The holder of a call or put option must exercise the right to sell or buy an asset
        D. The holder of a forward contract is obligated to buy or sell an asset
        Answer: C
        The holder of a call or put option has the right to exercise the option but is not required to do
        so. A, B, and C are correct<\/li>\n\n\n\n
      4. Which of the following is NOT true about call and put options:
        A. An American option can be exercised at any time during its life<\/li>\n<\/ol>\n\n\n\n

        B. A European option can only be exercised only on the maturity date
        C. Investors must pay an upfront price (the option premium) for an option contract
        D. The price of a call option increases as the strike price increases
        Answer: D
        A call option is the option to buy for the strike price. As the strike price increases this option
        becomes less attractive and is therefore less valuable. A, B, and C are true.<\/p>\n\n\n\n

          \n
        1. The price of a stock on July 1 is $57. A trader buys 100 call options on the stock with a strike
          price of $60 when the option price is $2. The options are exercised when the stock price is $65.
          The trader\u2019s net profit is
          A. $700
          B. $500
          C. $300
          D. $600
          Answer: C
          The payoff from the options is 100\u00d7(65-60) or $500. The cost of the options is 2\u00d7100 or $200.
          The net profit is therefore 500\u2212200 or $300.<\/li>\n\n\n\n
        2. The price of a stock on February 1 is $124. A trader sells 200 put options on the stock with a
          strike price of $120 when the option price is $5. The options are exercised when the stock price
          is $110. The trader\u2019s net profit or loss is
          A. Gain of $1,000
          B. Loss of $2,000
          C. Loss of $2,800
          D. Loss of $1,000
          Answer: D
          The payoff that must be made on the options is 200\u00d7(120\u2212110) or $2000. The amount received
          for the options is 5\u00d7200 or $1000. The net loss is therefore 2000\u22121000 or $1000.<\/li>\n\n\n\n
        3. The price of a stock on February 1 is $84. A trader buys 200 put options on the stock with a
          strike price of $90 when the option price is $10. The options are exercised when the stock price
          is $85. The trader\u2019s net profit or loss is
          A. Loss of $1,000
          B. Loss of $2,000
          C. Gain of $200
          D. Gain of $1000
          Answer: A
          The payoff is 90\u221285 or $5 per option. For 200 options the payoff is therefore 5\u00d7200 or $1000.
          However the options cost 10\u00d7200 or $2000. There is therefore a net loss of $1000.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

          Options Futures And Other Derivatives 9th Edition HullTest BankHull: Options, Futures, and Other Derivatives, Ninth EditionChapter 1: IntroductionMultiple Choice Test Bank: Questions with Answers option. The breakeven stock price below which the trader makes a profit isA. $25B. $28C. $26D. $20Answer: DWhen the stock price is $20 the two call options provide no payoff. The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-115527","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/115527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=115527"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/115527\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=115527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=115527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=115527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}