Please answer the questions in the attached PDF. This relates to trading call options and put options.

Question 1 The binomial price will theoretically equal the Black-Scholes-Merton price under which of the following conditions? A) when the number of time periods is large B) when the option is at-the-money C) when the option is in-the-money D) when the option is out-of-the-money Question 2 Which of the following statements about the Black-Scholes-Merton model is NOT true? A) It is the limit of the binomial model. B) The expected stock price plays a role in the model. C) It is a continuous time model. D) The model is consistent with put-call parity. Question 3 Which of the following assumptions of the Black-Scholes-Merton model is NOT correct? A) The stock volatility does not change throughout the option's life. B) The stock price follows a normal distribution. C) There are no transaction costs. D) There are no taxes. Question 4 Which of the following statements about the volatility is NOT true? A) The implied volatility often differs across options with different exercise prices. B) The implied volatility equals the historical volatility if the option is correctly priced. C) The implied volatility is determined by trial and error. D) The implied volatility is nearly linearly related to the option price. Question 5 If the stock price is 44, the exercise price is 45, the call price is 1.54, and the Black-ScholesMerton price of call using 0.28 as the standard deviation is 1.64. The implied volatility will be A) higher than 0.28. B) lower than 0.28. C) equal to 0.28. D) lower than the risk-free rate. Question 6 Which of the following statements about the option price sensitivity is NOT true? A) The option's delta is approximately the change in the option price for a change in the stock price. B) The option's rate of time value decay is represented by its theta. C) An option's gamma represents the risk of the delta changing. D) Vega captures the combined effects of time decay and volatility. Question 7 You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment. A) $200 profit B) $200 loss C) $300 profit D) $300 loss Question 8 A writer of a call option will want the value of the underlying asset to __________ and a buyer of a put option will want the value of the underlying asset to _________. A) decrease, decrease B) decrease, increase C) increase, decrease D) increase, increase Question 9 You purchase one IBM March 120 put contract for a put premium of $10. The maximum profit that you could gain from this strategy is _________. A) $120 B) $1,000 C) $11,000 D) $12,000 Question 10 You sell one Hewlett Packard August 50 call contract and sell one Hewlett Packard August 50 put contract. The call premium is $1.25 and the put premium is $4.50. Your strategy will pay off __________ in August. A) only if the stock price is either lower than $44.25 or higher than $55.75 B) only if the stock price is between $44.25 and $55.75 C) only if the stock price is higher than $55.75 D) only if the stock price is lower than $44.25 Question 11 What combination of puts and calls can simulate a long stock investment? A) Long call and short put B) Long call and long put C) Short call and short put D) Short call and long put Question 12 An investor is bearish on a particular stock and decided to buy a put with a strike price of $25. Ignoring commissions, if the option was purchased for a price of $0.85, what is the break even point for the investor? A) $24.15 B) $25.00 C) $25.87 D) $27.86 Question 13 Which of the following positions are bullish on the market? I. buying a stock II. writing a put III. buying a call IV. selling a call Question 14 You buy a put with a strike price of $50 and an option premium of $2.20. You simultaneously buy the stock at a price of $50 a share. What is your profit per share on these transactions if the stock price at expiration is $55.19? Question 15 When you write a covered call, you: A) forfeit upside potential gains in exchange for current income. B) risk having to buy shares of the underlying security at the market price. C) risk selling your underlying shares at a currently unknown price. D) are basically offering to buy shares in exchange for receiving the option premium. E) accept unlimited risk