Finance MCQs FPSC NTS PPSC Past Papers Test Questions – Page 2

If market price of a share at expiration is $100 and exercise price is $90, then value of a put option at expiration is

(A) –$10
(B) $0
(C) $1
(D) $10

The answer is: (B) $0
Here, price at expiration = ST = 100
Exercise price = K = 90
Put Option = max(K-ST,0) = max(90-100,0) = max(-10,0)
So, between -10 and 0, the maximum value is 0.

Which of the following instrument has the lowest total direct cost?

(A) straight bonds
(B) corporate stocks
(C) all issues have same cost
(D) none of these

The answer is: (A) straight bonds

The interest rate earned if a financial asset is held until its maturity is called

(A) term structure
(B) spinning
(C) yield
(D) spread

The answer is: (C) yield

The difference between strike price and stock price is known as

(A) intrinsic value
(B) option premium
(C) time premium
(D) none of these

The answer is: (A) intrinsic value