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ÔN TRẮC NGHIỆM

Quản trị rủi ro tài chính (Đại học Tôn Đức Thắng)

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EXERCISE Introduction Chapter 1

Question 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’s time.
B. One side has the obligation to buy an asset for a certain price in one year’s 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’s time.

Question 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 (S>K)
D. A put option will always be exercised at maturity if the strike price is greater than the
underlying asset price (K>S)

Question 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

Scenario 1: S>K => S>30

- Do call opt, do not put opt
- Profit 2 call opt = 2x [(S - 30) - 3(Cost)]
- Profit 1 put opt = -4
=> Total profit = 2x [(S - 30) - 3] -4 >0 => S>35

Question 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 option. The breakeven stock price below
(<) which the trader makes a profit is
A. $25
B. $28
C. $26
D. $20

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Scenario 2: S<K => S<30

- Do call opt, do not put opt
- Profit 2 call opt = -2 x 3 = -6
- Profit 1 put opt = [(K-S) -4]
=> Total profit = [(30-S) -4] -6 >0 => S<20

Question 5: Which of the following is approximately true when size is measured in terms
of the underlying principal amounts or value of the underlying assets (quy mô được đo bằng
số tiền gốc cơ sở hoặc giá trị của tài sản cơ bản):
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.

Question 6: Which of the following best describes the term “spot price”
A. The price for immediate delivery (giao ngay)
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

Question 7: 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

Question 8: An investor sells a futures contract as 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

Cause (F0-F1)*units = (1500-1540)*100= -4000

Question 9: Which of the following describes European options?

A. Sold in Europe

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B. Priced in Euros
C. Exercisable only at maturity
D. Calls (there are no European puts)

Question 10: 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

Question 11: 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
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

Question 12: 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’s net profit is
A. $700
B. $500
C. $300
D. $600

(65-60)x100 - 2x100 = 300

Question 13: 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’s 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

(120-110)x200 - 5x200= 1,000

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Question 14. 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’s net profit or loss is
A. Loss of $1,000
B. Loss of $2,000
C. Gain of $200
D. Gain of $1000

(90-85)x200 - 10x200 = 1,000

Question 15. The price of a stock on February 1 is $48. A trader sells 200 put options
on the stock with a strike price of $40 when the option price is $2. The options are
exercised when the stock price is $39. The trader’s net profit or loss is
A. Loss of $800
B. Loss of $200
C. Gain of $200
D. Loss of $900

(40-39)x200 - 2x200 = 200

Question 16. A speculator can choose between buying 100 shares of a stock for $40
per share and buying 1000 European call options on the stock with a strike price of $45
for $4 per option. For second alternative to give a better outcome at the option maturity,
the stock price must be above
A. $45
B. $46
C. $55
D. $50

Question 17. A company knows it will have to pay a certain amount of a foreign
currency to one of its suppliers in the future. Which of the following is true
A. A forward contract can be used to lock in the exchange rate
B. A forward contract will always give a better outcome than an option
C. An option will always give a better outcome than a forward contract
D. An option can be used to lock in the exchange rate

Question 18: A short forward contract on an asset plus a long position in a European
call option on the asset with a strike price equal to the forward price is equivalent to
A. A short position in a call option
B. A short position in a put option

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C. A long position in a put option

D. None of the above

Suppose
- ST is the final asset price
- K is the strike price/forward price
A short forward contract leads to a payoff of K−ST.
A long position in a European call option leads to a payoff of max(ST−K, 0).
When added together we see that the total position leads to a payoff of max(0, K−ST),
which is the payoff from a long position in a put option.

Question 19. A trader has a portfolio worth $5 million that mirrors the performance of a
stock index. The stock index is currently 1,250. Futures contracts trade on the index
with one contract being 250 times the index. To remove market risk from the portfolio
the trader should
A. Buy 16 contracts
B. Sell 16 contracts
C. Buy 20 contracts
D.Sell 20 contracts

One futures contract = 1250×250 = 31250

The number of contract required = 5,000,000/31250 =16

Question 20. Which of the following best describes a central clearing party
A. It is a trader that works for an exchange
B. It stands between two parties in the over-the counter market
C. It is a trader that works for a bank
D. It helps facilitate futures trades

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EX1: The price of a stock on February 1 is $48. A trader sells 200 put options on the
stock with a strike price of $40 when the option price is $2. The options are exercised
when the stock price is $39. The trader’s net profit or loss is

The payoff from the options is 100×(39-40) = $500.

The cost of the options is 2×100 = $200.
The net profit is therefore 500−200 = $300.

EX2: A trader has a portfolio worth $5 million that mirrors the performance of a stock
index. The price of a stock index is currently $1,250. Futures contracts trade on the
index with one contract being 250 times the index. To remove market risk from the
portfolio the trader should

One futures contract protects a portfolio worth = 1250×250.

The number of contracts required is therefore 5,000,000/(1250×250)=16.

EX 1. An investor buys one December call option contract on Google with a strike
price of 880$. Calculate the profit of investor when:
a/ the price of Google in December is 800
b/ the price of Google in December is 1000

a/ K = 880; S= 800
The profit of investor = S-K = -80 (loss)
b/ K = 880; S= 1000
The profit of investor = S-K = 120 (gain)

EX 3. A one-year call option on a stock with a strike price of $40 costs $4; a one-year
put option on the stock with a strike price of $40 costs $5. Suppose that a trader buys
two call options and one put option. The breakeven stock price above which the trader
makes a profit is

Scenario 1: S>K => S>40

- do call opt, don't put opt
- profit call opt = 2x[(S-K)-Cost] = 2x[(S- 40) - 4
- profit put opt = -5
=> Total = 2x[(S- 40) - 4] - 5> 0 => 2x(S- 40) - 8>5 => S > 46,5

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EX 4. A one-year call option on a stock with a strike price of $70 costs $4; a one-year
put option on the stock with a strike price of $70 costs $2. Suppose that a trader buys
three call options and two put options. The breakeven stock price above which the
trader makes a profit is?

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