Florida State University

FIN 4504

1. Which of the following options are correct i. Options are derivatives securities ii. The value of an option is dependent upon the value of the underlying security iii. The seller of an option retains the option premium whether or not the option is exercised iv. Options can provide leverage benefits 2. The maker of a call or put option is the: ¾ Party who writes the option 3. The writer of a put: ¾ Accepts the obligation to sell a predetermined number of shares at a predetermined price. 4. Which of the following affect the value of puts and calls written on shares of common stock? i. Price volatility of its underlying stock ii. Current market price of underlying stock iii. Length of time until the option