CHAPTER 15: Options Market
Tim Asisten Dosen IPM
SOAL 1: PILIHAN GANDA
1. The price of a four-month GE call
option with an exercise price of $35 is
$6. The current price of GE stock is
$40 per share. The call holder exercises
the call at expiration when the price of
GE stock is $43. What is the payoff to
the call holder? (Each contract is for
100 shares of stock.)
a. $200
b. $300
c. $500
d. $800
Feedback: The option will be exercised
at $35/share and the stock can be sold
in the market for $43/share. That is a
payoff of $43 - 35 = $8/share, or $800.
The net cash flow would only be $200
since the call holder paid $6/share to
buy the call.
2. A three-month HP put option with an
exercise price of $60 sells for a
premium of $8. The put is in the money
only if the price of HP stock is …
a. greater than $68 per share
b. greater than $60 per share
c. less than $60 per share
d. less than $52 per share
Feedback: A put option is in the money
when the exercise price is greater than
the asset's price. The payoff to the put
holder is the exercise price minus the
market price of the stock.
3. The price of a two-month AT&T put
option with an exercise price of $45 is
$7. The current price of AT&T stock is
$40 per share. The put holder exercises
the put at expiration when the price of
AT&T stock is $35. What is the profit
per share to the put holder?
a. $2
b. $3
c. $10
d. $12
Feedback: The put holder sells each
share to the put writer for $45 when the
stock's value is $35. That yields a
payoff of $10/share. Subtracting the $7
put premium that was paid to purchase
the put, the profit is $3/share.
4. You have taken a protective put
position by purchasing 100 shares of
AMR stock at $20 per share and one
AMR put option contract at a premium
of $1. The put has a strike price of $15
and expires in 6 months. What is the
maximum potential loss for the
protective put?
a. $100
CHAPTER 15: Options Market
Tim Asisten Dosen IPM

b. $500 Feedback: The worst case scenario is

c. $600 if the ending stock price is $75 because
d. $800 both the put and the call will be
worthless. The loss will be ($2 + 6) ×
Feedback: The holder will lose money
100 = $800.
if the stock's price falls to or below $15.
Suppose that the ending stock price is
$10. The holder of the put can sell
6. An investor buys a two-month XYZ
shares to the put writer for $15/share,
call option contract with a $25 strike
yielding an inflow of $1,500. The cost
price, and sells a two months XYZ call
of the stock sold is the purchase price
option contract with a $30 strike price.
times the number of shares, or $20 ×
The premium is $2 for the call with the
100 = $$2,000. The cost of the put
$25 strike price. The premium is $1 for
option was $1 × 100 = $100. Adding
the call with the $30 strike price. What
the inflows and the outflows we get
is the maximum potential profit for this
$1,500 – 2,000 – 100 = -$600. The loss
position?
will remain the same for any ending
a. $400
share price that is less than or equal to
b. $500
$15/share.
c. $600
d. unlimited
5. You just purchased a three-month BP
Feedback:
call option (exercise price $75) and a
three-month BP put option (exercise The maximum profit will occur when

price $75). The call premium is $6 and the ending stock price is above $30. In

the put premium is $2. Your maximum this case you will exercise the call and

potential loss from this position is …. the put holder will exercise the put. The

(Assume each contract is for 100 payoffs to the options and the profit

shares of stock.) calculations are shown below. If you

a. $200 need to, try working with a few

b. $600 different prices to convince yourself

c. $800 that $400 is the answer.

d. unlimited
CHAPTER 15: Options Market
Tim Asisten Dosen IPM
7. Suppose that you write a six-month
IBM call option with an exercise price
of $100 when the current price of IBM
stock is $110 per share. The call
premium is $18. At expiration, the
price of IBM stock is $104. What is
your profit per share?
a. $12
b. $14
c. $18
d. $22
Feedback: The call will be exercised so
you'll have to give up the stock for $104
and receive the exercise price of $100,
for a loss of $4/share. This amount is
offset by the call premium you received
when you wrote the call, which was
$18/share. The net profit per share is
$18 – 4 = $14.
8. Assume that you are bearish on a
particular stock. Which of these
options you would buy?
a. Call option
b. Put option
c. LEAPS
d. Covered call
Feedback: A put option gives you the
right to sell the stock to the put writer
for a specified exercise price (X) on or
before its expiration date. If you expect
the price of the stock to decline you can
lock in the right to sell it for X by
buying a put option.
9. A callable bond gives an option to the
____________, so that the coupon rate
for a newly-issued callable bond is
____________ than the coupon on
straight debt.
a. holder of the bond; greater
b. holder of the bond; less
c. issuing firm; greater
d. issuing firm; less
Feedback: Whether to call the bond is
up to the issuing firm. Because the
holders of callable bonds might not
receive interest payments up until the
maturity date, the firm compensates
them by setting the coupon rate higher
than it would be on a similar straight
bond.
10. Which one of the following statements
about warrants is false?
a. Warrants require a firm to issue a
new share of stock to satisfy its
obligation.
CHAPTER 15: Options Market
Tim Asisten Dosen IPM

b. Warrants result in a cash flow to the exercised, increasing the number of

firm when the warrant holder pays shares outstanding for the firm.
the exercise price.
c. Exercise of a warrant requires the
firm to deliver an already-issued
share of stock to discharge the
obligation.
d. Warrants are often issued in
conjunction with another security.

Feedback: The firm must issue a new

share of stock when a warrant is