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Free Series 9 Sample Exam Questions Results
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| 40% - sorry, you failed |
| Exam: Free Series 9 Sample Exam Questions |
| Time Spent: 00 hours 8 minutes 3 seconds |
| Max. Marks: 10 |
| Marks Obtained: 4 |
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| Correct Answer Wrong Answer | ||||
| Q. No | Question | Correct Answer | Your Answer | Explanation |
|---|---|---|---|---|
| 1. | A customer thinks that XCV is likely to rise in price over the next year and wants to know how much of the premium to purchase a 12 month option may be borrowed. You should tell him: | 25 percent | 0 percent | A LEAP or an option with more than 9 months remaining to maturity may be purchased on margin by depositing 75% of the option’s premium. The customer may borrow the remaining 25% |
| 2. | A customer writes an IBM October 120 call and receives a $4 premium for the call. The customer at the same time buys an IBM October 100 call and pays a $12 premium for the call. IBM is currently selling at $108. If both calls expire unexercised, the customer will realize a profit or loss of: | $800 loss | $800 loss | The customer bought the spread and paid a net premium of $800 if both options expire they will lose the entire $800 premium. |
| 3. | A May 105 Treasury Bond call is quoted at 1.08. How much would an option investor pay to purchase the call, if they think that interest rates will fall? | $1,250 | $1,080 | The investor would pay $1,250. The quote of 1.08 = 1 8/32 % or 1.25% of $100,000 = $1,250. |
| 4. | A pension plan manager feels that interest rates are likely to rise over the next few months. The pension plan is holding $10,000,000 worth of Treasury bonds that the manager wants to hedge against a price decline. How many price based put options would the manager have to purchase to hedge the plan’s portfolio? | 100 | 100 | Price based Treasury bond options cover $100,000 par value. The portfolio manager would have to purchase 100 put options. |
| 5. | An investor has held 1000 shares of UYT for 8 months. The investor paid $56.78 for the shares. The stock has increased in value to $59.76. The investor buys 10 UYT May 55 puts at $2.05. Which of the following are true? | I only | II and III | The investor has purchased puts to protect a stock position held less than 12 months therefore any gain or loss will be short term. All of the other choices are false. |
| 6. | An investor who exercises a put must do which of the following for tax purposes? | Subtract the put's premium from the strike price | Add the put\'s premium to the execution costs of the transaction | The investor must subtract the put’s premium from the put’s strike price. This will give the investor the net proceeds for the sale of the underlying stock. |
| 7. | An investor who has written 10 ABC Nov 75 calls will automatically have the stock called away from them at expiration if the options are: | 1 cent in the money | 1 cent in the money | All options held for the accounts of customers will automatically be exercised if the option is 1 cent in the money. |
| 8. | I & II | I & II | The OCC publishes the disclosure document to meet the prospectus requirement of The Securities Act of 1933 and to disclose the risks of option investing. The other choices are not part of the intent of the disclosure document. |
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| 9. | I & II | I & III | The OCC is not involved in option trading rotations and the puts with the highest strike price are the first puts quoted in the trading rotation. |
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| 10. | A large investor has a high beta portfolio with a value of $5,000,000. The OEX index is at 500. The investor wants to protect his account from a market decline. Which of the following is true? | The investor could effectively hedge his portfolio by purchasing more than 10 OEX 500 puts | The investor could only effectively hedge his portfolio by purchasing puts on each of the stocks he owns | The key to this question is the fact that the investor’s portfolio has a high beta. The investor’s portfolio would fall more than the overall market during a decline. As such in order to effectively hedge his portfolio he would have to purchase more puts to account for the higher beta of the portfolio. |