MCQ Quiz

Question 1 of 21

In the firm-value application, the put component is most likely interpreted as:

the dividend yield on firm assets
the exercise premium on equity
the credit spread on the firm's debt

Question 2 of 21

A protective put most accurately combines which two positions?

Long underlying and long put
Long underlying and short call
Long call and long risk-free bond

Question 3 of 21

At debt maturity, shareholder payoff is most accurately written as:

$\min(V_T, D)$
$\max(0, D - V_T)$
$\max(0, V_T - D)$

Question 4 of 21

Which expression most accurately states put-call forward parity?

$F_0(T)(1+r)^{-T} - p_0 = c_0 + X(1+r)^{-T}$
$F_0(T)(1+r)^{-T} + p_0 = c_0 + X(1+r)^{-T}$
$F_0(T) + p_0 = c_0 + X(1+r)^{-T}$

Question 5 of 21

Which expression most likely states put-call parity for this module?

$S_0 + p_0 = c_0 + X(1+r)^{-T}$
$S_0 - p_0 = c_0 + X(1+r)^{-T}$
$S_0 + c_0 = p_0 + X(1+r)^{-T}$

Question 6 of 21

At debt maturity, debtholder payoff is most accurately written as:

$\max(0, V_T - D)$
$V_T - D$
$\min(V_T, D)$

Question 7 of 21

If firm value at debt maturity is USD 65 and debt face value is USD 80, shareholder payoff is most likely:

USD 15
USD 65
USD 0

Question 8 of 21

Under put-call forward parity, $p_0 - c_0$ is most likely equal to:

$[F_0(T) - X](1+r)^{-T}$
$[X - F_0(T)](1+r)^{-T}$
$X - F_0(T)$

Question 9 of 21

Under put-call parity, a long underlying is most accurately replicated by:

short put, long call, and long risk-free bond
long put, long call, and short risk-free bond
short put, short call, and long risk-free bond

Question 10 of 21

If put-call parity does not hold, investors most likely have access to:

guaranteed dividend income
riskless arbitrage profits
automatic call exercise

Question 11 of 21

A synthetic protective put most likely replaces the cash underlying with:

a short forward and a risk-free bond
a long forward and a risk-free bond
a long call and a short put

Question 12 of 21

A fiduciary call most likely consists of:

a long call and a long risk-free bond
a short call and a long underlying
a long put and a long forward

Question 13 of 21

A call is priced at USD 7, spot is USD 40, and the present value of the exercise price is USD 45. Under put-call parity, the put price is most likely:

USD 2
USD 8
USD 12

Question 14 of 21

Under put-call parity, a covered call is most likely replicated by:

short risk-free bond and long put
long risk-free bond and short put
long call and long bond

Question 15 of 21

A European call is most likely equivalent to which portfolio under put-call parity?

long underlying, long put, and short risk-free bond
short underlying, long put, and long risk-free bond
long underlying, short put, and long risk-free bond

Question 16 of 21

A debtholder position is most likely similar to:

a direct call option on firm value
a long underlying plus a long put
risk-free debt minus a put on firm value

Question 17 of 21

For European options on the same underlying with the same exercise price and expiration, put-call parity most likely links a put, a call, the underlying, and which other item?

A risk-free asset
A dividend stream
A swap payment

Question 18 of 21

A covered call is most accurately described as:

long underlying and long call
long underlying and short call
short underlying and long put

Question 19 of 21

A long put together with a short call is most likely equivalent to:

a short risk-free bond and a long forward
a long risk-free bond and a short forward
a long underlying and a short bond

Question 20 of 21

A shareholder claim on firm value is most likely similar to which option position?

A put option on firm value
A short call on firm value
A call option on firm value

Question 21 of 21

A European put can most likely be replicated by which portfolio?

long call, long risk-free bond, and short underlying
short call, long risk-free bond, and long underlying
long call, short risk-free bond, and short underlying

Option Replication Using Put Call Parity (Katas)

First Principles Thinking: core idea

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First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

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