Question 1

Section C (4 Mark)Mr. XYZ buys a Nifty Call with a Strike price Rs. 4100 at a premium of Rs. 170.45 and he sells a Nifty Call option with a strike price Rs. 4400 at a premium of Rs. 35.40.What would be the Net Payoff of the Strategy?* if Nifty closes at 4200* if Nifty closes at 5447

Options :

A : 145.95 and -75.05

B : -35.05 and 164.95

C : 145.85 and -65.50

D : 25.05 and 154.25

Answer: B

Question 2

Section A (1 Mark)A European call option allows the buyer to

Options :

A : Sell the underlying asset at the exercise price on the expiration date.

B : Sell the option in the open market prior to expiration.

C : Buy the underlying asset at the exercise price on the expiration date.

D : C and D.

Answer: D

Question 3

Section B (2 Mark)Broker dealer model is more prevalent in

Options :

A : North America

B : Middle East

C : Latin America

D : Europe

Answer: A

Question 4

Section A (1 Mark)A(n) _____________ is related to the credit option and is usually aimed at lenders able to handle comparatively limited declines in value but wants insurance against serious losses.

Options :

A : credit risk option

B : standby letter of credit

C : credit linked note

D : credit swap

Answer: D

Question 5

Section A (1 Mark)An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.

Options :

A : Positive

B : Negative

C : Zero

D : All of the above

Answer: C

Free CWM_LEVEL_2 Mock Exam – Practice Online Confidently

Buying Options: