17. Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. The exercise price is 80 for a call. Assume a two-period world. What is the hedge ratio if the stock goes down one period?

0.00

0.0725

1.00

0.73

none of the above

18.

Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. The exercise price is 80 for a call. Assume a one-period world. What is the hedge ratio?

0.429

0.714

0.571

0.823

none of the above

20.

Options on futures are also known as

spot options

commodity options

exchange options

security options

none of the above

23.

Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. The exercise price is 80 for a call. Assume a one-period world. What is the theoretical value of the call?

8.00

4.39

5.15

5.36

none of the above

24.

All of the following are practical applications of the binomial model except

choices regarding real options

options regarding executive incentive plans

models in which the stock price can go up, down, or remain constant in the next period

embedded options within debt securities

none of the above

25.

The process of selling borrowed assets with the intention of buying them back at a later date and lower price is referred to as

		longing an asset
		asset flipping
		shorting
		anticipated price fall arbitrage
		none of the above