An Introduction to Derivatives and Risk Management 10th Edition By Don M. - Test Bank

CHAPTER 2:  STRUCTURE OF OPTIONS MARKETS

MULTIPLE CHOICE TEST QUESTIONS

1.         Identify the true statement regarding the largest derivatives exchanges.

a.          CME Group is one of the top five largest derivatives exchange, based on volume

b.         Intercontinental Exchange is one of the top five largest derivatives exchange, based on volume

c.          The volume of trading exceeded one billion on each of the top five derivatives exchanges

d.         Among the top 20 derivatives exchanges, several different continents are represented

e.          all of the above

2.         A call option priced at $2 with a stock price of $30 and an exercise price of $35 allows the holder to buy the stock at

a.          $2

b.         $32

c.          $33

d.         $35

e.          none of the above

3.         A put option in which the stock price is $60 and the exercise price is $65 is said to be

a.          in-the-money

b.         out-of-the-money

c.          at-the-money

d.         exercisable

e.          none of the above

4.         Organized options markets are different from over-the-counter options markets for all of the following reasons except

a.          exercise terms

b.         physical trading floor

c.          regulation

d.         standardized contracts

e.          credit risk

5.         The number of options acquired when one contract is purchased on an exchange is

a.          1

b.         5

c.          100

d.         500

e.          8,000

6.         The advantages of the over-the-counter options market include all of the following except

a.          customized contracts

b.         privately executed

c.          freedom from government regulation

d.         lower prices

e.          none of the above