1. The price of a credit default swap (CDS) on a AAA-rated bond would be higher than the price of an otherwise identical BB-rated bond.
True
False
2. Suppose you hold a share of stock and a put option on that share. If the stock price is below the exercise price when the option expires the value of your position is the value of the stock.
True
False
3. You can sell a call on a stock that you do not own.
True
False
4. If the 3-month SPX futures is below the spot value, we can infer that markets expect the SPX to decline over the next 3 months.
True
False
5. If the current stock price is $50, the intrinsic value of a call option with an exercise price of 30 is
-20
0
20
50
none of the above