Binomial Approach Multiple Choice Questions with Answers – PDF Download

MCQ 1: In binomial approach of option pricing model, the value of stock is subtracted from call option obligation value to calculate:

1. current value of portfolio
2. future value of portfolio
3. put option value
4. call option value

MCQ 2: The current value of stock in portfolio with current option price $20 is $50, then present value of portfolio would be:

1. 30
2. 70
3. 0.0167
4. 0.3

MCQ 3: The value of stock is $250 and the call option obligation is $100 then the current value of portfolio would be:

1. 0.35
2. 150
3. 350
4. 2.5

MCQ 4: In binomial approach of option pricing model, the fourth step is to create:

1. equalize the domain of payoff
2. equalize the ending price
3. riskless investment
4. high risky investment

MCQ 5: The current value of portfolio is $550 and to cover an obligation of call option is $200 then the value of stock would be:

1. 350
2. 0.0275
3. 750
4. 2.75