Quiz Ch 20 – T/F Profit Potential of In-the-Money Options
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Purchasing an in-the-money option is likely to result in a profit most of the time.
True or false: Purchasing an in-the-money option is likely to result in a profit most of the time.
True or false: Selling a put option provides the privilege to buy stock at a specified strike price.
True or false: A put option writer faces losses when the stock price falls.
True or false: In European options, the sum of the call option value and the present value of the exercise price equals the sum of the put option value and the share price.
True or false: The price of a call option tends to climb when the underlying stock experiences an upward movement.
True or false: Profit diagrams do NOT account for the time value of money.
True or false: Options written on volatile assets have higher value, assuming other factors remain constant.
How is the cumulative price change variance calculated for the stock following a random walk with variance σ² over t days until expiration?