la. (2 marks) Using a binomial pricing model, what is the impact on the price of a call option if the company increases the dividend paid to shareholders? The call option price: A. Will drop B. Will increase Will remain constant Impact cannot be determined 1b. (2 marks) Which of the following statements is NOT correct on a binomial tree. A. Some American put options can be optimally exercised prior to maturity. B. American call options on a non-dividend paying stock can be valued without solving for every node. C. Risk-neutral valuation and no-arbitrage arguments give the same option prices. D. The delta of an option does not change in time. E. None of the above. 1c. (2 marks) The Gamma of a European put option on a non-dividend-paying stock is "-0.3". What is the Gamma of the corresponding European call option? A. -0.3 B. 0.3 -0.7 D. 0.7 None of the above. AOAG 1d. (2 marks) What is the total dollar cost to create a delta hedged position against a 200 short call position? Assume calls are priced at $4.16, the delta is 0.7644, and stock price is $73.00 A. $9,880 B. $10,328 $11,168 $12,660 None of the above. le. (2 marks) The current price of a non-dividend-paying stock is $100. Over the next year the stock is expected either to rise to $110 or to fall to $90. An investor buys two put options with a strike price of $105. Which of the following is necessary to delta-hedge the position? Buy 0.5 shares of the stock. Sell 0.5 shares of the stock. Buy 0.25 shares of the stock. D. Sell 0.25 shares of the stock. None of the above. C. la. (2 marks) Using a binomial pricing model, what is the impact on the price of a call option if the company increases the dividend paid to shareholders? The call option price: A. Will drop B. Will increase Will remain constant Impact cannot be determined 1b. (2 marks) Which of the following statements is NOT correct on a binomial tree. A. Some American put options can be optimally exercised prior to maturity. B. American call options on a non-dividend paying stock can be valued without solving for every node. C. Risk-neutral valuation and no-arbitrage arguments give the same option prices. D. The delta of an option does not change in time. E. None of the above. 1c. (2 marks) The Gamma of a European put option on a non-dividend-paying stock is "-0.3". What is the Gamma of the corresponding European call option? A. -0.3 B. 0.3 -0.7 D. 0.7 None of the above. AOAG 1d. (2 marks) What is the total dollar cost to create a delta hedged position against a 200 short call position? Assume calls are priced at $4.16, the delta is 0.7644, and stock price is $73.00 A. $9,880 B. $10,328 $11,168 $12,660 None of the above. le. (2 marks) The current price of a non-dividend-paying stock is $100. Over the next year the stock is expected either to rise to $110 or to fall to $90. An investor buys two put options with a strike price of $105. Which of the following is necessary to delta-hedge the position? Buy 0.5 shares of the stock. Sell 0.5 shares of the stock. Buy 0.25 shares of the stock. D. Sell 0.25 shares of the stock. None of the above. C