Question

a. Which one of the following comparative statements about common stock call options and warrants is correct?
b. Consider a bullish spread option strategy using a call option with a $ 25 exercise price priced at $ 4 and a call option with a $ 40 exercise price priced at $ 2.50. If the price of the stock increases to $ 50 at expiration and the option is exercised on the expiration date, the net profit per share at expiration (ignoring transaction costs) is
i. $ 8.50
ii. $ 13.50
iii. $ 16.50
iv. $ 23.50
c. A convertible bond sells at $ 1,000 par with a conversion ratio of 40 and an accompanying stock price of $ 20 per share. The conversion premium and (percentage) conversion premium, respectively, are
i. $ 200 and 20%
ii. $ 200 and 25%
iii. $ 250 and 20%
iv. $ 250 and 25%
d. A put on XYZ stock with a strike price of $ 40 is priced at $ 2 per share, while a call with a strike price of $ 40 is priced at $ 3.50. What is the maximum per- share loss to the writer of the uncovered put and the maximum per- share gain to the writer of the uncovered call?
e. You create a strap by buying two calls and one put on ABC stock, all with a strike price of $ 45. The calls cost $ 5 each, and the put costs $ 4. If you close your position when ABC is priced at $ 55, your pershare gain or loss is
i. $ 4 loss
ii. $ 6 gain
iii. $ 10 gain
iv. $ 20 gain


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  • CreatedJune 21, 2015
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