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1. A put option gives the owner the right to ________ an asset at a fixed price at some future date.
A. buy
B. sell
C. hold
D. none of the above
2. Suppose that a stock sells at a price of $60 on the expiration date. Compute the payoff to the seller of a call option if the option strike price is $20.
A. -$20
B. -$30
C. -$40
D. -$50
3. Suppose you purchase a call option for $4 and a strike price of $30. On the expiration day, the price of the stock is $40. What is the return on the call option if you hold your position until maturity?
A. 170%
B. 150%
C. 125%
D. 130%
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