It is to a bond issuer's benefit when an embedded put option on the bond is exercised. Group of answer choices True False
FALSE
A put option on the bond gives the borrower a right to sell back the bond to the issuer. Here the issuer is at disadvantage because when the interest rate rises, bondholder can sell back the bond to issuer and reinvest at a higher rate.
It is to a bond issuer's benefit when an embedded put option on the bond is...
Steve sold a put option when the option premium was $1.20. What is Steve's total profit if the exercise price was $15 and the option was never exercised?
When a put option is exercised, the: seller of the option receives the strike price. seller of the option receives the option premium. buyer of the option sells the underlying asset and receives the option premium. buyer of the option pays the option premium and receives the underlying asset. seller of the option must buy the underlying asset and pay the strike price.
When a put option is exercised, the: Multiple Choice seller of the option receives the strike price. seller of the option receives the option premium. buyer of the option sells the underlying asset and receives the option premium. Incorrect buyer of the option pays the option premium and receives the underlying asset. seller of the option must buy the underlying asset and pay the strike price.
An embedded option associated with the following instrument potentially alters the rate sensitivity of the underlying instrument. Fixed-rate mortgage loan with a yield of 5.5 percent and 30-year final maturity. The option is typically exercised when interest rates _____ substantially. It is the ____that determines when the option is exercised. X A. increase; bank B. decrease; bank C. increase; bank’s customer D. decrease; bank’s customer (continue from problem 1) An existing fixed-rate mortgage is ____ rate sensitive in a ____...
The price of a stock is $67. A trader sells 5 put option contracts on the stock with a strike price of $70 when the option price is $4. The options are exercised when the stock price is $69. What is the trader’s net profit or loss? Please show work! I know the answer is “gain of $1,500”
A synthetic European put option is created by: Buying the discount bond, buying the call option, and short-selling the stock. Buying the call option, short-selling the discount bond, and short-selling the stock. Short-selling the stock, buying the discount bond, and selling the call option.
4. You purchase a put option on Swiss francs for a premium of $.05, with an exercise price of $.50. The option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $.58, how much is the payoff of this long option? And your profit? (And also, please draw the payoff diagram to a long put option holder, optional, for extra credits). (Answer: -$0.05; 0)
The taxable value of an expense payment benefit is generally the amount paid or reimbursed by the employer in respect of an employee. Group of answer choices True False
Question 32 You are considering purchasing a put option on a stock with a current price of $39. The exercise price is $35, and the price of the corresponding call option is $7. According to the put-call parity theorem, if the risk-free rate of interest is 4%, and there are 60 days until expiration, the value of the put should be what? Group of answer choices between $2.90 and $3.00 between $2.60 and $2.70 between $2.80 and $2.90 between $2.70...
Investor A sells a put option for $6.60, and investor B sells a call option for $8.79. Both options have the same strike price of $45 and can be exercised in 15 months. Suppose the stock price on the exercise date is $50, and the continuously compounded interest rate is 4%. a) What is the total profit of investor A on the exercise date? Answer = $ b) What is the total profit of investor B on the exercise date?...