A hedge fund has a 2 & 20 fee structure: 2% of management fee plus 20% incentive fee on fund returns in excess of T-Bill rate. In a performance reporting period, the hedge fund yields 29% when the T-Bill rate is 3%. What are the fees to the hedge fund managers?

	A.	7.0%.
	B.	7.2%.
	C.	7.4%.

Amazon.com Inc. stock price is at $445 per share. A three-month call option on the stock with an exercise price of $470 is traded at $11.70. What's the time value of the option?

	A.	$0.
	B.	$11.70.
	C.	-$35.00.

A European-style call option and a European-style put option share the same underlying stock, same time to maturity of three months, and same exercise price of $55. The put option is priced at $6.70. If the risk free rate is 5 percent per year and the stock price is $52. Compute the call option price.

	A.	$4.37.
	B.	$6.70.
	C.	$7.25.

Stocks of the Binomial Inc. are currently $50 per share and it is known that its stock price will either increase by 15% per year or decrease by 25% per year, independently for the next two years. The prevailing risk-free rate is 3%. What is the value of an American put option on the stock with two years of life and an exercise price of $53.

	A.	$3.00.
	B.	$5.29.
	C.	$6.47.

Stocks of the Binomial Inc. are currently $50 per share and it is known that its stock price will either increase by 15% per year or decrease by 25% per year, independently for the next two years. The prevailing risk-free rate is 3%. Value an American call option on the stock with two years of life and an exercise price of $53.

	A.	$3.00.
	B.	$6.06.
	C.	$6.47.

What is the following option strategy called: C(X=50) + C(X=30)?

	A.	It's a bear spread.
	B.	It's a bull spread.
	C.	It's a collar.

What is the following option strategy called: C(X=50) + P(X=30)?

	A.	It's a bear spread.
	B.	It's a bull spread.
	C.	It's a collar.

At a stock price of $58, a call option is priced at $14.20 with a delta of 0.77. When the stock price decreases to $56, what is the estimated call price?

	A.	$15.74.
	B.	$13.43.
	C.	$12.66.

This question is based on the following information on the Black-Scholes (BS) model.

index level = 2107

exercise price = 2180

time to option maturity = 0.36 years

continuously compounded risk-free rate = 5%

estimated continuously-compounded dividend yield on the index = 4% per year

estimated index return standard deviation = 15%

Based on the above input, what is the European put price using the BS model?

	A.	$98.45.
	B.	$107.69.
	C.	$112.03.

This question is based on the following information on the Black-Scholes (BS) model.

index level = 2107

exercise price = 2180

time to option maturity = 0.36 years

continuously compounded risk-free rate = 5%

estimated continuously-compounded dividend yield on the index = 4% per year

estimated index return standard deviation = 15%

What is the BS put hedge ratio?

	A.	-0.6141.
	B.	-0.3859.
	C.	0.3859.

This question is based on the following information on the Black-Scholes (BS) model.

index level = 2107

exercise price = 2180

time to option maturity = 0.36 years

continuously compounded risk-free rate = 5%

estimated continuously-compounded dividend yield on the index = 4% per year

estimated index return standard deviation = 15%

What is the risk neutral probability that this put option finishes in-the-money?

	A.	0.3520.
	B.	0.3859.
	C.	0.6480.

This question is based on the following information on the Black-Scholes (BS) model.

index level = 2107

exercise price = 2180

time to option maturity = 0.36 years

continuously compounded risk-free rate = 5%

estimated continuously-compounded dividend yield on the index = 4% per year

estimated index return standard deviation = 15%

If the market put price is $2 higher than the BS price, assume that volatility is estimated correctly, what can we conclude about the estimated dividend yield?

	A.	It's too high.
	B.	It's too low.
	C.	It's correctly estimated.