1 Your broker recommends that you purchase ABC Inc. at $60. The stock pays a $2.40 dividend which (like its per share earnings) is expected to grow annually
at 8 percent. If you want to earn 12% on your funds what is the valuation of the stock?
Multiple choice (Only 1 answer is right)
2 The Writer of a Naked call option wants____
a the prices of the stock and the call to rise
b the prices of the stock and the call to fall
c the prices of the stock to fall and the call to rise
d the prices of the stock to rise and the call to remain stable.
3 If the investor sells a stock Short that individual reduces the risk of loss by_____
a buying a put
b buying a call
c entering a limit order to sell the stock if its price declines
d increasing the collateral with broker
4 If the investor anticipates that the price of stock will be Stable he or she may _____
a sell a staddle
b buy a straddle
c buy a call
d buy a put
5 If the investor anticipates that the price of stock will fluctuate this individual may___
a sell a call and sell a put
b buy a call and buy a put
c buy a call and sell a put
d sell a call and buy a put
The questions originated from the Textbook- Introduction to Investments (10th edition) from the author: Herbert B. Mayo.