1. True or False questions (Circle T If The Statement Is True, F Is It False)

1) Investors who purchase options acquire nothing more than the right to buy or sell the shares of the underlying security. T F

2) An options strike price is the stock price at which the option holder breaks even. T F

3) The value of a call increases as the price of the underlying security rises. T F

4) NZMA stock is currently selling for $128. Is June 125 call options "out-of-the-money"? T F

5) The maximum amount the buyer of a put can lose is the cost of the option. T F

6) If a stock price does not rise or fall by the amount of the option premium, the option will not be exercised. T F

7) A futures contract grants the buyer the option to either buy or sell a specified amount of a commodity. T F

8) An investor's margin in a futures contract is checked each day under a procedure known as mark-to-the-market. T F

9) The November 22, 2015 the on-line edition of the Wall Street Journal listed the following information on oat futures. Quotes are in cents per bushel. The cost of a March 2016 contract was $11,430 at the market close? T F

10) The rate of return on a futures contract is based on the size of the initial margin deposit. T F

2. Check to the following figure and look at the Apple options. Suppose you buy an April expiration call option with exercise price 105.

a. If the stock price in April is $111, will you exercise your call? What are the profit and rate of return on your position?

b. What if you had bought the April call with exercise price 100?

c. What if you had bought an April put with exercise price 105?