Chosse the correct answer: $1-$A call provision gives bondholders the right to demand, or "call for," repayment of a bond. Typically, companies call bonds if interest rates rise and do not call them if interest rates decline.

a$.$ True

b$.$ False

$2-$ Abond has a $$1,000$ par value, makes annual interest payments of $$100,$ has $5$ years to maturity, cannot be called, and is not expected to default. The bond should sell at a premium if market interest rates are below $10\%$ and at a discount if interest rates are greater than $10\%.$

a$.$ True

b$.$ False

$3-$Which of the following statements is true regarding a call writer:

a$.$ The call writer expects the stock to move upward.

b$.$ The call writer expects the stock to remain the same or move down.

c$.$ The call writer expects the stock to split.

d$.$ The call writer expects to sell the stock prior to expiration of the option.

$4-$The value of the option at expiration could be either positive or zero

a$.$true

b$.$false

$5-$One of the basic relationships in interest rate theory is that, other things held constant, for a given change in the required rate of return, the. price. the time to maturity, the $q,$ the change in

a$.$ longer; smaller.

b$.-$ longer; greater.

c$.$ shorter; smaller.

d$.$ Statements b and c are correct.

$6-$Market equilibrium exists

a$.$ only in fiction

b$.$ when prices are fixed for the one$-$time period of the investors

c$.$ when prices are at levels that provide no incentive for speculation

d$.$ only in money markets, not in capital market

$7-$The price that the buyer of a call option pays to acquire the option is called the

a$.$ strike price

b$.$ exercise price

c$.$ execution price

d$.$ acquisition price

e$.$ premium