答案和详解如下：

1.A put option currently has an option premium of $3 and a strike price of $40. The market price of the stock is $42 at expiration. The expiration day value of the option is:

A)   $2.

B)   $0.

C)   $3.

D)   $5.

The correct answer was B)

The expiration day value of the put is $0 because it is trading out-of the money.

2.An investor would exercise a put option when the:

A)   price of the stock is equal to the strike price.

B)   call premium exceeds the put premium.

C)   price of the stock is above the strike price.

D)   price of the stock is below the strike price.

The correct answer was D)

A put option gives its owner the right to sell the underlying good at a specified price (strike price) for a specified time period. When the stock's price is less than the strike price a put option has value and is said to be in-the-money.

3.Basil, Inc., common stock has a market value of $47.50. A put available on Basil stock has a strike price of $55.00 and is selling for an option premium of $10.00. The put is:

A)   in-the-money by $7.50.

B)   in-the-money by $10.00.

C)   out-of-the-money by $2.50.

D)   out-of-the-money by $17.50.

The correct answer was A)

The put allows a trader to sell Basil common stock for $7.50 more than the current market value ($55.00 - $47.50). The trade is normally closed out with a cash settlement, but the trader could buy 100 shares for $47.50 per share and immediately sell them to the option writer for $55.00.

4.A put option is “in-the-money” when what is most accurate?

A)   The stock price is higher than the exercise price of the option.

B)   There is no put option with a higher exercise price in the expiration series.

C)   The stock price is lower than the exercise price of the option.

D)   There is no put option with a lower exercise price in the expiration series.

The correct answer was C)

The put option is in-the-money if the stock price is below the exercise price.

5.Which of the following statements about moneyness is most accurate? When the stock price is:

A)   above the strike price, a put option is out-of-the-money.

B)   above the strike price, a put option is in-the-money.

C)   below the strike price, a call option is in-the-money.

D)   below the strike price, a call option is at-the-money.

The correct answer was A)

When the stock price is above the strike price, a put option is out-of-the-money.
When the stock price is below the strike price, a call option is out-of-the-money.