THROUGH 114 RELATE TO DERIVATIVES. (10.5 MINUTES)WHEN TH...

Questions 108 through 114 relate to Derivatives. (10.5 minutes)

When the underlying asset does not pay any cash flows, the value of an American call option is:

equal to the value of an otherwise identical European

A)

call option.

B)

less than the value of an otherwise identical European

C)

greater than the value of an otherwise identical

European call option.

Question #109 of 120 Question ID: 1146216

The value of a put option on a stock trading at 35 will decrease when:

the risk-free rate is higher.

the volatility of the stock price is higher.

the dividends paid on the stock are higher.

Question #110 of 120 Question ID: 1146217

During the life of a European option, the amount by which its price is greater than its exercise value is most

accurately described as its:

time value.

moneyness.

intrinsic value.

Question #111 of 120 Question ID: 1146210

Which of the following statements about plain vanilla interest rate swaps is most accurate? The swap counterparties:

typically make a margin deposit with a clearinghouse.

exchange fixed rate payments for variable rate

payments.

exchange the notional principal at initiation and

termination.

Question #112 of 120 Question ID: 1146211

The convenience yield associated with holding the underlying asset of a derivative is most accurately described as:

the nonmonetary benefits of holding the asset.

the monetary and nonmonetary benefits of holding the

asset.

asset, net of its holding costs.

Question #113 of 120 Question ID: 1146208

Which of the following statements about futures margin is least accurate?

The initial margin is set by the clearinghouse based on

the volatility of the price of the underlying asset.

funds from the account.

If the margin account balance falls below the

maintenance margin level, the account balance must be

brought back up to the maintenance level.

Question #114 of 120 Question ID: 1146218

Which of the following portfolios has the same future cash flows as a put option?

Long call option, long risk-free bond, short underlying

Long call option, short risk-free bond, long underlying

Short call option, long risk-free bond, long underlying

Question #115 of 120 Question ID: 1146228