MC Sample
MC Sample
MC Sample
2. Which of the following are always positively related to the price of a European
call option on a stock?
(a) The stock price
(b) The strike price
(c) The Time to expiration
(d) Dividend
(e) None of the above
4. Which of the following strategies could one use to replicate a short put?
The following information refers to the next two questions. An option on a non-
dividend paying stock has the following features: the current stock price is $15, the
exercise price is $14, the risk-free interest rate is 6% per annum, and the time to
maturity is 3 months.
6. Suppose N(d1) = 0.7000 and N(d2) = 0.6300. Then the call option price is:
(a) 0.20
(b) 0.49
(c) 1.81
(d) 3.13
(e) 4.35
7. Which of the following variables in the Black-Scholes option pricing model is the
most difficult to obtain?
(a) the volatility
(b) the risk-free rate
(c) the stock price
(d) the time to expiration
(e) the strike price
8. A stock price is currently $100. Over each of the next two three-month period it
is expected to increase by 10% or fall by 10%. Consider a six-month American
put option with a strike price of $95. The risk-free interest rate is 8% per annum.
What is the value of the option? What is the value of the option if it’s American?