You are bullish on the prospects of ABC share price rising. There are two speculative strategies that you are considering.

• Under the first strategy, you would purchase 100 ABC shares at the spot price of $9.9.
• Under the second strategy, you would enter long European call options covering 1,000 ABC shares. The option has a strike price of $18 and can be purchased for a premium of $0.99 per share.

How high must ABC share price rise for the second strategy to become at least as profitable as the first? That is, at what share price do the two strategies provide the same profit?

Enter your answer to 2 decimal places.

The price of a stock is $17.1. A call option on this stock has a strike price of $13.6 and is quoted at $4.5.

You enter a short position in this European call option.  One option contracts covers 100 underlying shares. 

The call option is exercised when the stock price is $27.6. Calculate your total net loss:

The price of a stock on July 1 is $47.5. A trader enters a long European put option on this stock with a strike price of $52.1.

The quoted option price is $5.6. One option contract covers 100 shares.

If the put option is exercised when the stock price is $45.2, what is the trader’s net profit is:

Commonwealth Bank (CBA) shares are currently trading at $75. Three months from now, CBA will pay a dividend of $4.2 per share. If the riskless interest rate is 9% pa, what is the fair forward price ("F") for delivery of CBA shares in 13 months time?

Enter your answer to 2 decimal places. Do not enter the dollar sign "$".

Silver is currently trading at $25 per ounce. Assume that the storage costs for silver are 1% pa. The riskfree rate is 2% pa.

Calculate the fair forward price ("F") for delivery of silver in in 9 months time?

Enter an answer to 2 decimal places. Do not enter the dollar sign "$".

The spot exchange rate between Australia and New Zealand is AUD 1.00 = NZD 1.29. Interest rates in Australia and New Zealand are 4% and 7% per annum respectively.

Calculate the fair forward price for delivery of one NZD in 8 months time.

Your answer will be expressed in terms of AUD. Give an answer to 4 decimal places.

A long forward contract can be "synthetically replicated" as follows:

You are bullish on the prospects of ABC share price rising. There are two speculative strategies that you are considering.

• Under the first strategy, you would purchase 100 ABC shares at the spot price of $7.
• Under the second strategy, you would enter long European call options covering 1,000 ABC shares. The option has a strike price of $14.8 and can be purchased for a premium of $0.7 per share.

How high must ABC share price rise for the second strategy to become at least as profitable as the first? That is, at what share price do the two strategies provide the same profit?

Enter your answer to 2 decimal places.

A trader who is "bearish" is someone who believes the price of the underlying asset will fall.

Which of the following option positions are suitable for bearish sentiment over the underlying asset?

Which of the following is NOT true about call and put options: