This document of BUS 405 Week 1 Chapter 3 Overview of Security Types includes:

1. Which one of the following is the best definition of a money market instrument?

2. A fixed-income security is defined as:

3. The annual interest payment divided by the current price of a bond is called the:

4. A security originally sold by a business or government to raise money is called a(n):

5. A financial asset that represents a claim on another financial asset is classified as a _____ asset.

6. A futures contract is an agreement:

7. An agreement that grants the owner the right, but not the obligation, to buy or sell a specific asset at a specified price during a specified time period is called a(n) _____ contract.

8. A call option is an agreement that:

9. A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a:

10. The price paid to purchase an option contract is called the:

11. The amount of money per share that will be received when a put option on stock is exercised is called the _____ price.

12. Riverside Metals recently issued some debt that had an original maturity of nine months. This debt is best classified as a(n):

13. Money market instruments:

14. Money market instruments issued by a corporation:

15. Which one of the following is classified as a fixed-income security?

16. Which one of the following sentences is correct concerning fixed-income securities?

17. Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $989, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

18. Bond trades are reported:

19. The Beta Movers’ bonds pay an annual interest payment equal to 7.12 percent of:

20. What was yesterday’s closing price on the Alpha Industrial bond?

21. What is the current price of a $1,000 face value Beta Movers’ bond?

22. Which one of the following represents a residual ownership interest in the issuer?

23. Which one of the following statements related to common stock is correct?

24. Preferred stock:

25. Preferred stock:

26. How many whole shares of Ditch Digger stock traded today?

27. What is today’s closing price per share of Buy Rite stock?

28. Which one of the following is a derivative asset?

29. Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price per bushel of $9.75. This is an example of a:

30. Uptown Jewelers purchased a futures contract on 200 ounces of gold to be exchanged 3-months from now. As the contract holder, Uptown Jewelers:

31. Futures contracts:

32. At the time a futures contract is written:

33. Which of the following are generally included in a standardized futures contract?

34. Harvest Fields sold ten September futures contracts on oats. Harvest Fields will:

35. Investing in a futures contract:

36. By how much did today’s settlement price per bushel for the May 08 wheat futures contract increase over the prior day’s settlement price?

37. What are the lowest and highest prices per bushel at which the March 08 wheat futures contract sold today?

38. What price would you have paid today per bushel for the May 08 wheat futures contract if you bought the contract at the final price of the day?

39. If you want the right, but not the obligation, to buy a stock at a specified price you should:

40. If you want the right, but not the obligation, to sell a stock at a specified price you should:

41. If you are willing to buy a stock and you wish to receive the option premium you should:

42. If you are willing to sell a stock and wish to receive the option premium you should:

43. A European put option grants the holder the right to:

44. An American call option grants the holder the right to:

45. When a put option is exercised, the:

46. You will earn a profit as the owner of a call option if the price of the underlying asset:

47. The seller of a naked call is betting that the price of the underlying asset will:

48. Options expire on the _____ of the expiration month.

49. The price you will pay (per underlying share) to buy the 50 call option on JL stock is:

50. What price will you receive (per underlying share) if you sell the 47.50 call option on JL stock?

51. What was the prior day’s closing price on the 50 call option on JL stock?

52. You own eight (8) 7.25 percent coupon bonds with a total maturity value of $8,000. How much will you receive every six months as an interest payment?

53. A 7.5 percent coupon bond is currently quoted at 89.3 and has a face value of $1,000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds?

54. A $1,000 face value bond has a 7.85 percent semi-annual coupon and sells for $982.50. What is the current yield?

55. A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 6.8 percent. What is the current price of this bond?

56. The Talliru Company bond pays interest semi-annually. You own five of these bonds. What is the amount you will receive as your next interest payment?

57. If you purchase five Zeus bonds, the cost will be _____ and the annual interest income will be _____.

58. What is the current yield on Cloverdale stock?

59. Josh owns 200 shares of Chelsea stock. What is the current value of his shares?

60. Aldridge, Inc. pays an annual dividend of $1.22. What is the dividend yield on this stock?

61. Baker Company has 136,000 shares of stock outstanding and a PE ratio of 18. What was the net income for the most recent four quarters?

62. What was the previous day’s closing price for Baker Co. stock?

63. Vivian purchased 700 shares of Aldridge, Inc. stock at what turns out to be the lowest price during the past year. How much has the value of her shares changed since she made this investment?

64. What is the latest earnings per share for Chelsea Industries stock if the PE is 22?

65. A pension fund purchased 25 round lots of Baker Company stock at the closing price of the day yesterday. What was the cost of that purchase?

66. Last week, you purchased three November 08 soybean futures contracts when the price quote was 1302?6. What is your current profit or loss on this investment?

67. Julie was lucky enough to purchase two September 08 futures contracts on soybeans when the contracts were at the lowest price of the day. What is Julie’s total profit or loss as of the end of the day?

68. What was the total price fluctuation on one September 08 soybeans contract today?

69. You purchased four November 08 futures contracts on soybeans when they first became available this morning. Your investment has been worth as little as _____ and as much as _____.

70. You purchased four August 09 futures contracts on soybeans at a price quote of 1156?6. Each contract is for 5,000 bushels with the price quoted in cents and 1/8 ths of a cent per bushel. Assume the contract price is 1161?4 when you close out your contract six weeks from now. What will be your total profit or loss on this investment?

71. You own one futures contract on gold that you purchased at a quoted price of 948.4. The current price quote is 1008.8. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

72. You would like to lock in the selling price on 55,000 bushels of wheat, which you plan to harvest and deliver to the market in September. The September futures price quote is currently 912?6. If you write September futures contracts on your wheat, you will be guaranteed a total price of _____ for your crop. Each contract is quoted in cents and 1/8 ths of a cent per bushel with a contract size of 5,000 bushels.

73. You would like to have the right to purchase 200 shares of ZZ Industries stock at a price of $32.50 a share. How much will it cost you to buy options to meet this objective?

74. You own 500 shares of ZZ Industries stock which you purchased for $28.60 a share. You would like to have the right to sell your shares for $30 a share. What will be the cost to obtain this right?

75. The 47.50 put on a stock is trading at 1.32 bid and 1.37 ask. To buy one option contract, you must pay _____ at the time the contract is purchased.

76. You want to sell three call option contracts on ZZ Industries stock at a strike price of $30 a share. How much will you receive in option premiums if you place this order today?

77. You want the right, but not the obligation, to sell 600 shares of ZZ Industries stock at a price of $35 a share. How much will it cost you to establish this option position?

78. You purchased five call option contracts with a strike price of $40 and an option premium of $1.35. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

79. You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45. You held the option until the expiration date. On the expiration date, the stock was selling for $21.70 a share. What is the total profit or loss on your option position?

80. You bought twelve call option contracts with a strike price of $27.50 and a premium of $0.77. At expiration, the stock was selling for $26.90 a share. What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

81. You bought five call option contracts with a strike price of $47.50 and an option premium of $1.20. At expiration, the stock was selling for $51.30 a share and you exercised your option. What is your total cost basis in the acquired shares?

82. You purchased two call option contracts with a strike price of $22.50 and a premium of $2.80. At expiration, the stock was selling for $28.10 a share. What is the total amount it cost you to acquire your shares?

83. You purchased six put option contracts with a strike price of $45 and a premium of $1.10. What is the total net amount you will receive for your shares if you exercise this contract when the underlying stock is selling for $42.90 a share?

84. You purchased seven put option contracts with a strike price of $25 and a premium of $0.85. At expiration, the stock was selling for $24.80 a share. What is the total net amount you received for your shares, assuming that you disposed of your shares on the expiration date?

85. You bought a put option contract with a strike price of $37.50 and a premium of $1.80. At expiration, the stock was selling for $35 a share. What is the net total amount you received for your shares assuming that you disposed of your shares on the expiration date?

86. You purchased 500 shares of SLG, Inc. stock at a price of $40.20 a share. You then purchased put options on your shares with a strike price of $47.50 and an option premium of $1.90. At expiration, the stock was selling for $48.30 a share. You sold your shares on the option expiration date. What is your net profit or loss your transactions related to SLG, Inc. stock?

87. You own 300 shares of stock which you would like to have the right to sell at $40 a share. The 40 call option is quoted at $0.35 bid, $0.40 ask. The 40 put is quoted at $0.45 bid, $0.50 ask. How much will it cost you to obtain the right to sell all of your shares at $40 a share?

88. Alicia owns 600 shares of Danube stock. She thinks the market price will continue to rise but would like to ensure that she can get at least $47.50 a share should she decide to sell her shares. The 47.50 call option is quoted at $1.15 bid, $1.20 ask. The 47.50 put is quoted at $0.90 bid, $0.95 ask. How much will it cost her to ensure that she can sell all of her shares for at least $47.50 each?

89. What are the basic differences between a T-Bill and a T-Bond? Which security(ies) are considered risk-free?

90. Preferred stock is sometimes considered to be a cross between debt and equity. Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

91. Farmer Mac raises wheat. He expects his yield this summer to be 320,000 bushels but he decides to sell futures contracts on only 230,000 bushels. What is his logic for selling futures and why didn’t he sell futures on his entire crop?

92. Explain what a put option is and describe the circumstances under which you would be willing to sell a put.

93. Why would you purchase a call option? What is your maximum profit or loss on such a position?

94. Briefly compare and contrast options and futures.