Question

3. You purchased 100 shares of JNJ stock at $50 per share. The stock is currently selling at $45. You would like to lock up your total loss to no more than $700. Which of the following action will help you?

OPTIONS;

A. place a stop-buy order at $57

B. place a stop-loss order at $43

C. place a limit buy order at $53

D. place a limit sell order at $47

E. none of the above

4.

Which of the following statements are true?

options:

A. A 10-year T-bond with 9% coupon sells at a higher price than a 10-year T-bond with a 10% courpon rate.

B. A 3-month expiration call option with strike price of $40 sells at a higher price than a 3-month expiration call option with strike price of $45

C. A 3-month expiration European call option with strike price of $40 sells at a higher price than a 3-month expiration American call option with strike price of $40

D. A put option on a stock selling at $50 has at a higher premium than put option on a stock selling at $55

E. none of the above

Answer 1

1. I will be placing a stop loss order in order to protect myself from further loss because I already have a buying position in the stock.

I will be placing a stop loss order at 43 in order to keep my loss at 700

Correct answer will be option (B) place a stop loss order at $43.

2. Statements which are true are as follows-

(B) a three month expiration call option with strike price of $40 sales at a higher price than three month expiration call option with strike price of $45.

this is because the call option with lower strike price will have the higher value.

All the other option are false.