Q7. Jessica Fassler, options trader, recently wrote two put options on two different underlying stocks (AlphaDog Software and OmegaWolf Publishing), both with a strike price of $11.50. The probabilities that the prices of AlphaDog and OmegaWolf stock will decline below the strike price are 65% and 47%, respectively. The probability that at least one of the put options will fall below the strike price is approximately: A) 0.31. B) 0.81. C) 1.00.
Q8. Thomas Baynes has applied to both Harvard and Yale. Baynes has determined that the probability of getting into Harvard is 25% and the probability of getting into Yale (his father’s alma mater) is 42%. Baynes has also determined that the probability of being accepted at both schools is 2.8%. What is the probability of Baynes being accepted at either Harvard or Yale, but not both? A) 7.7%. B) 64.2%. C) 10.5%.
Q9. An analyst has a list of 20 bonds of which 14 are callable, and five have warrants attached to them. Two of the callable bonds have warrants attached to them. If a single bond is chosen at random, what is the probability of choosing a callable bond or a bond with a warrant? A) 0.70. B) 0.85. C) 0.55.
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