Homework Answers
When interest rates falls then the prices of bond increases
.
This provides benefit when buying a call option or selling a put
option..
Hence option a long call and written put is correct
option
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Which of the following bond option positions increase in value when interest rates decrease? Select one:...
QUESTION 25 Which of the following option positions represents the most risk to an investor? a....
QUESTION 25 Which of the following option positions represents the most risk to an investor? a. A long put b. A long straddle. c. A long call. d. A short straddle. QUESTION 26 Mike believes that XYZ stock will increase in value. He buys 20 XYZ March 60 call options for $4 when the price of XYZ is $61. If XYZ falls to $55 and stays there through March, what will be Mike's gain or loss? O a. Gain $8,000...
Which of the following bonds will have the largest decrease in price if interest rates increase...
Which of the following bonds will have the largest decrease in price if interest rates increase in Year 1 of the life of the bonds? A. An option free 11-year 9% coupon bond selling at a discount. B. A 10-year 5% coupon bond that is callable at 104 in three years. C. A 7-year 4% coupon bond that is puttable after two years. D. A 10-year zero coupon bond.
Question 1 1). When the central bank raises the interest rates, then generally a. bond prices...
Question 1 1). When the central bank raises the interest rates, then generally a. bond prices increase and stock prices decrease b. bond prices decrease and stock prices increase c. bond prices and stock prices tend to decrease d. bond prices and stock prices tend to increase P.S. is the correct answer "c" option? pls explain. 2). Which of the following must be true regarding the bond described by the cash flow stream (-100, 5, 105)? (select all that apply)...
Which of the following will increase revenue per available room? Select one: a. Decrease of the...
Which of the following will increase revenue per available room? Select one: a. Decrease of the ADR when demand for rooms is low b. Increase of the ADR when demand for rooms is high c. Increasing the hotel rates in a low season d. Decrease of the ADR when demand for rooms is stable
Which of the following is likely to have the greatest price increase if interest rates decrease....
Which of the following is likely to have the greatest price increase if interest rates decrease. O A A 10-year zero coupon bond with a yield of 8%. O B A 10-year coupon-paying bond with a yield of 8% A perpetuity with a yield of 8%. (The duration of perpetuity is equal to (1+y)/y)
Please explain how a call option value changes when interest rates increase with all else remaining...
Please explain how a call option value changes when interest rates increase with all else remaining the same.
1.Which of the following is probably the most sensitive to changes in real interest rates? Select...
1.Which of the following is probably the most sensitive to changes in real interest rates? Select one: a. Government purchases b. Exports c. Consumption d. Imports e. Investment 2.When interest rates increase, Select one: a. government purchases will increase to offset the decline in consumption, investment, and net exports. b. expenditures may increase or decrease. c. investment will increase. d. expenditures increase. e. expenditures decrease. 3.If real GDP is greater than potential GDP, Select one: a. the rate of inflation...
Which of the following statements is least accurate? The value of a: Call option will decrease...
Which of the following statements is least accurate? The value of a: Call option will decrease as the Rf rate increases. Put option will decrease as the exercise price decreases. Call option will decrease as the underlying stock price decreases.
4.Which one of the following statements about the approach to bond pricing is NOT true? Select...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select one: A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows. B. The value, or price, of any asset is the future value of its cash flows. 6.Which one of the following statements is NOT true? Select one: A. The yield to maturity of a bond is the discount rate that makes the present value...
If market interest rates increase, investors in corporate bonds will see the current market value of...
If market interest rates increase, investors in corporate bonds will see the current market value of their bonds do what in the secondary market? a. If the market interest rates increase, the coupon rate on the bond increases b. When market interest rates increase, the market value of corporate bonds increase c. Remain the same, because the face value never changes d. When market interest rates increase, the market value of corporate bonds decrease
QUESTION 25 Which of the following option positions represents the most risk to an investor? a. A long put b. A long straddle. c. A long call. d. A short straddle. QUESTION 26 Mike believes that XYZ stock will increase in value. He buys 20 XYZ March 60 call options for $4 when the price of XYZ is $61. If XYZ falls to $55 and stays there through March, what will be Mike's gain or loss? O a. Gain $8,000...
Which of the following is likely to have the greatest price increase if interest rates decrease. O A A 10-year zero coupon bond with a yield of 8%. O B A 10-year coupon-paying bond with a yield of 8% A perpetuity with a yield of 8%. (The duration of perpetuity is equal to (1+y)/y)
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