Construct a profit function for combinations of options and stocks.

Describe how the variables used in the Black-Scholes and binomial option pricing models and the put-call parity relationship affect the value of a call option.

Describe how stock index options, interest rate options, and LEAPS® differ from listed puts and calls on common stock.

Explain the advantages and disadvantages of convertibles and compute conversion values and conversion premiums.

Compute the price of a bond, given the discount rate, and the yield to maturity, given the price.

Compute the current yield, the realized compound yield to maturity, the yield to call, and the realized rate of return for a bond.

Identify the factors that influence the price volatility of a bond.

Compute a bond's duration statistic.

Explain how to use the duration statistic as an index number, to estimate bond price changes, and as a tool for immunizing a portfolio.

Discuss bond swaps, ladders, bullets, and barbells as strategies for managing a bond portfolio.