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1. The major difference between options on real assets and options on financial assets is that options on: financial assets are costly financial assets have higher probability of positive payoff real assets are implicit, rather than explicit real assets are not influenced by price volatility. 2. Investors who hold warrants essentially have a: put option on the firm's bonds. put option on the firm's equity. call option on the firm's bonds. call option on the firm's equity. 3. The payoff's from investing in options are designed so that: both buyers and sellers can profit the seller's(buyers) gain is the buyers(sellers) loss. roughly 20% of sellers and 50% of buyers profit few buyers or sellers profit; they buy "insurance" 4. You are currently holding a call option on a stock with a exercise price of $80. if the current stock price is $60, your net proceeds by exercising this option will be: ($20) $0 $20 $60 5. Which of the following call options would command the higher premium, other things equal? October 1996 expiration, $45 strike price December 1996 expiration, $40 strike price March 1997 expiration, $45 strike price June 1997 expiration, $ 40 strike price

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