1. When E -S < 0 a put option is said to be

1. At the money
2. In the money
3. Out of the money

2. The maximum gain on a put is __________, and the maximum loss is ___________

1. The exercise Price minus the Put premium (E -P), the Put Premium
2. The Stock Price minus the Put premium (S -P),the Put Premium
3. The exercise Price minus the Put premium (E -P), the stock price

3. The Put-Call Parity relationship depicts the relationship between the values of the put and the call options, the stock price and the exercise price at maturity. Applying the Put-Call Parity create a synthetic Stock

1. Long Put, Long Call and a Borrowing at the RF
2. Long Call, Short Put, and a Borrowing at the RF
3. Long Call, Short Put, and an Investment at the RF

4. The Put-Call Parity points to a mispricing. The Fiduciary Call value is greater than the value of the Protective Put. To take advantage of the arbitrage opportunity

1. Sell the Call, borrow at the RF, buy the stock, and buy the put
2. Sell the Put, sell the stock, buy the Call and Invest at the RF
3. Sell the Put, Sell the Call, buy the Stock and Invest at the RF

5. When S > E the Call option is said to be

1. In the money
2. Out of the money
3. At the money

6. Applying the Put-Call Parity relationship, create a synthetic Call

1. Long Put, short the Stock and Invest
2. Long the Stock, Short the put and Borrow at the RF
3. Long the Stock, Long the Put and Borrow at the RF

7. Todays stock price is S_0. A covered call is an investment strategy where the investor

1. takes a long position in the Stock and a short position in the call with an E < S₀
2. takes a long position in the Stock and a short position in the call with an E >S₀
3. takes a short position in the Stock and a long position in a Call with an E >S₀

8. An example of a vertical spread is

1. Investment in a stock and a long put with an exercise price of $125
2. A long call with an exercise price of $125 and a short put with an exercise price of $125
3. a long Call with an exercise price of $125 and a short call with an exercise price of $140