Which of the following statements is (are) true concerning settlement options?
I. A straight life annuity provides the lowest amount of periodic income of all the life income options.
II. Fixed-period and fixed-amount are life income options.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: D
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Under Rule 10b-5, which is true about insiders?
A) Employees at all levels in a company are insiders, as well as lawyers, accountants, and consultants even when hired only on a temporary basis. B) Officers and directors are insiders, but lawyers or accountants that are hired only on a temporary basis are not insiders. C) Agents hired on a temporary nonemployee basis to provide services to the company are not insiders. D) Officers and directors are insiders, but employees who are not officers are not insiders.
Amy owns 100 shares of ABC stock with a cost basis of $35 a share. The stock is currently trading at $54 a share
Amy believes the price of ABC stock will fall to $45 a share in the near future but over the longer term of 3 to 5 years, increase in value to $75 a share. Amy would like to benefit from the expected near-term decline if it occurs. Therefore, Amy writes a covered call at a strike price of $55 and a premium of $2. (a) How will the covered call help Amy profit if the expected price decline occurs? (b) What is the maximum loss Amy can incur from the call? (c) What is the maximum profit Amy can incur from the call? What will be an ideal response?