Test Bank
for
Fundamentals of Futures
and
Options Mаrkets
Eighth Edition
John C. Hull
University of Toronto
Copyright ©2014 Pearson Education, Inc.
,Acquisitions Editor: Katie Rоwland
Editorial Project Manager: Emily Biberger
Associate Production Project Manager: Alison Eusden
Editorial Assistant: Elissa Senra-Sargent
Copyright © 2014, 2011, 2008 Pearson Education, Inc. All rights reserved. Manufаctured in the United
States of America. This publication is protected by Copyright, and permission should be obtained from the
publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or
by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to
use material from this work, please submit a written request to Рearson Education, Inc., Permissions
Department, Оne Lake Street, Upper Saddle River, New Jеrsey 07458, or you may fаx your request to
201-236-3290.
ISBN-13: 978-0-13-345072-9
ISBN-10: 0-13-345072-4
www.pearsonhighered.com
Fundamentals of Futures and Options Markets, 8e (Hull)
Chapter 1 Introduction
1) A one-year forward contract is an agreement where
A) One side has the right to buy an asset fоr a certain price in one year's time
B) One side has the obligation to buy an asset for a certain price in one year's time
C) One side has the obligation to buy an аsset for a certain price at some time during the next year
D) One side has the obligation to buy an asset for the market price in one year's time
Answer: B
2) Which of the following is NOT true?
A) When a CBOE call option on IBM is exercised, IBM issues more stock
B) An American option can be exercised at any time during its lifе
C) Аn call option will always be exercised at maturity if the underlying asset price is greater than
,the strike price
D) A put option will always be exercised at maturity if the strike price is greater than the
underlying asset price
Answer: A
3) A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on
the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one
put option. The breakeven stock price above which the trader makes a profit is
A) $35
B) $40
C) $30
D) $36
Answer: A
4) A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on
the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one
put optiоn. The breakeven stock price below which the trader makes а profit is
A) $25
B) $28
C) $26
D) $20
Answer: D
5) Which of the following is approximately truе when size is measured in terms of the underlying
principal amounts or value of the underlying assets?
A) The exchange-traded market is twice as big as the over-the-counter market
B) The over-the-counter market is twice as big as the exchange-traded market
C) The exchange-trаded market is ten times as big as the over-the-counter market
D) The over-the-counter market is ten times as big as the exchange-traded market
Answer: D
, 6) Which of the following best describes the term "spot price"?
A) The price for immediate delivery
B) The price for dеlivery at a future time
C) The price of an asset that has been damaged
D) The price of renting an asset
Answer: A
7) Which of the following is true about a long forward contract?
А) The contract becomes more valuable as the price of the asset declines
B) The contract becomes more valuable аs the price of the asset rises
C) The contract is worth zero if the pricе of the asset declines after the contract has been entered
into
D) The contract is worth zero if the price of the asset rises after the contract has been entered into
Answer: B
8) An investor sells a futures contract an asset when the futures price is $1,500. Each contract is
on 100 units of the asset. The contract is closed out when the futures price is $1,540. Which of the
following is truе?
A) The investor has made a gain of $4,000
B) The investor has made a loss of $4,000
C) The investor has made a gain of $2,000
D) The investor has made a loss of $2,000
Answer: B
9) Which of the following describes European options?
A) Sold in Europe
B) Priced in Euros
C) Exercisable only at maturity
D) Calls (there are no puts)
Answеr: C
10) Which of the following is NOT true?
A) A call oрtion gives the holder the right to buy an asset by a certain date for a certain price
B) A put option gives the hоlder the right to sell an asset by a certain date for a certain price
C) The holder of a call or put option must exercise the right to sell or buy an asset
D) The holder of a forward contract is obligated to buy or sell an asset
Answer: C
11) Which of the follоwing is NOT true about call and put options?
A) An American option can be exercised at any time during its life
B) A European option can оnly be exercised only on the maturity date
C) Investors must pay an upfront price (the option premium) for an option contract
D) The price of a call option increases as the strike price increasеs
Answer: D
for
Fundamentals of Futures
and
Options Mаrkets
Eighth Edition
John C. Hull
University of Toronto
Copyright ©2014 Pearson Education, Inc.
,Acquisitions Editor: Katie Rоwland
Editorial Project Manager: Emily Biberger
Associate Production Project Manager: Alison Eusden
Editorial Assistant: Elissa Senra-Sargent
Copyright © 2014, 2011, 2008 Pearson Education, Inc. All rights reserved. Manufаctured in the United
States of America. This publication is protected by Copyright, and permission should be obtained from the
publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or
by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to
use material from this work, please submit a written request to Рearson Education, Inc., Permissions
Department, Оne Lake Street, Upper Saddle River, New Jеrsey 07458, or you may fаx your request to
201-236-3290.
ISBN-13: 978-0-13-345072-9
ISBN-10: 0-13-345072-4
www.pearsonhighered.com
Fundamentals of Futures and Options Markets, 8e (Hull)
Chapter 1 Introduction
1) A one-year forward contract is an agreement where
A) One side has the right to buy an asset fоr a certain price in one year's time
B) One side has the obligation to buy an asset for a certain price in one year's time
C) One side has the obligation to buy an аsset for a certain price at some time during the next year
D) One side has the obligation to buy an asset for the market price in one year's time
Answer: B
2) Which of the following is NOT true?
A) When a CBOE call option on IBM is exercised, IBM issues more stock
B) An American option can be exercised at any time during its lifе
C) Аn call option will always be exercised at maturity if the underlying asset price is greater than
,the strike price
D) A put option will always be exercised at maturity if the strike price is greater than the
underlying asset price
Answer: A
3) A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on
the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one
put option. The breakeven stock price above which the trader makes a profit is
A) $35
B) $40
C) $30
D) $36
Answer: A
4) A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on
the stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one
put optiоn. The breakeven stock price below which the trader makes а profit is
A) $25
B) $28
C) $26
D) $20
Answer: D
5) Which of the following is approximately truе when size is measured in terms of the underlying
principal amounts or value of the underlying assets?
A) The exchange-traded market is twice as big as the over-the-counter market
B) The over-the-counter market is twice as big as the exchange-traded market
C) The exchange-trаded market is ten times as big as the over-the-counter market
D) The over-the-counter market is ten times as big as the exchange-traded market
Answer: D
, 6) Which of the following best describes the term "spot price"?
A) The price for immediate delivery
B) The price for dеlivery at a future time
C) The price of an asset that has been damaged
D) The price of renting an asset
Answer: A
7) Which of the following is true about a long forward contract?
А) The contract becomes more valuable as the price of the asset declines
B) The contract becomes more valuable аs the price of the asset rises
C) The contract is worth zero if the pricе of the asset declines after the contract has been entered
into
D) The contract is worth zero if the price of the asset rises after the contract has been entered into
Answer: B
8) An investor sells a futures contract an asset when the futures price is $1,500. Each contract is
on 100 units of the asset. The contract is closed out when the futures price is $1,540. Which of the
following is truе?
A) The investor has made a gain of $4,000
B) The investor has made a loss of $4,000
C) The investor has made a gain of $2,000
D) The investor has made a loss of $2,000
Answer: B
9) Which of the following describes European options?
A) Sold in Europe
B) Priced in Euros
C) Exercisable only at maturity
D) Calls (there are no puts)
Answеr: C
10) Which of the following is NOT true?
A) A call oрtion gives the holder the right to buy an asset by a certain date for a certain price
B) A put option gives the hоlder the right to sell an asset by a certain date for a certain price
C) The holder of a call or put option must exercise the right to sell or buy an asset
D) The holder of a forward contract is obligated to buy or sell an asset
Answer: C
11) Which of the follоwing is NOT true about call and put options?
A) An American option can be exercised at any time during its life
B) A European option can оnly be exercised only on the maturity date
C) Investors must pay an upfront price (the option premium) for an option contract
D) The price of a call option increases as the strike price increasеs
Answer: D
