Scribd
Upload
37 views4 pages

Assignment 1 - Q

Uploaded by

fukchuntse
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
37 views4 pages

Assignment 1 - Q

Uploaded by

fukchuntse
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

FINA3080H

Assignment 1 Online submission NAME:


Due date: February , 2024, 11:59 pm
(according to Blackboard time, 5% of the total
marks will be deducted every day for late
Tse Fulk Chun
submission);
Student ID:
Please use this template provided to you and
please do not modify the original template, for
example by deleting the page, or adding a page.
1155176354

Ch 2
1a. Certificates of deposit may have a return lower than that of Treasury bills of same
maturity. No explanation required.
A. True B. False (5marks)

1a. Ans A

1b. Bond equivalent yield is used for U. S. T-bill quotation.


A. True B. False No explanation required. (5 marks)

1b. Ans
B

2. Consider the three stocks in the following table. Pt represents price at time t, and Qt
represents shares outstanding at time t. Stock C splits two-for-one in the last period. (25
marks)

P0 Q0 P1 Q1 P2 Q2
A 80 100 95 100 95 100
B 50 200 45 200 45 200
C 100 200 110 200 55 400

a. Calculate the rate of return (%) on a price-weighted index of the three stocks for the first
period (from t=0 to t=1 by calculating the index at t=0 and t=1)
b. Calculate the divisor (initially equal to three) for the price-weighted index in year 2?
c. Calculate the rate of return (%) of the price-weighted index for the second period (t=1 to
t=2).
d. Calculate the first-period (t=0 to t=1) rates of return (%) on the following index of the
three stocks using market value–weighted index.
e. Calculate the first-period (t=0 to t=1) rates of return (%) on the following index of the
three stocks using equally weighted index.
2. Ans
a.

b.

c.

d.

e.
3. Assume you can only choose to hold the options or exercise the options.
Look at the Apple options from below. Suppose you buy an October expiration call option
with exercise price $100. Note: Ignore the multiplier of 100, assume one option contract
can buy/sell only one share. (21 marks)

Apple (AAPL) Underlying stock price, S = $102. 05


Expiration Strike (E) Call Put
September 96 6. 20 0. 21
October 96 6. 35 0. 33
September 100 2. 20 1. 18
October 100 2. 62 1. 55
September 105 0. 36 4. 35
October 105 0. 66 4. 75

a. If the stock price in October is $106, will you exercise your call? What are the net profit
(in $) and the rate of return (%) if you exercise the call? You need to include the cost of
buying the option. Ignore time value of money. Assume selling the option is not
available. (12 marks)
3a. Ans

b. Will you exercise the call if you had bought the October call with exercise price $96?
S=106. No explanation needed. (3 marks)

3b. Ans

c. Will you exercise the option if you had bought an October put with exercise price $100?
S=106. No explanation needed. (3 marks)

3c. Ans

d. When comparing (A) exercising the option vs. (B) selling the option, which one is more
profitable? Simply answer A or B. No explanation required. (3 marks)

3d. Ans
4. You predict the stock price is going to fall in the near future. Should you ________ to
make profit?

a. Buy put or sell/write call


b. Sell put
c. Buy call
d. None of the above

4. Ans

5. Which one of the following is true?

a. buy call would have unlimited loss


b. buy put would have unlimited loss
c. sell/write call would have unlimted loss
d. None of the above

5. Ans

[End of Assignment 1]

You might also like