Ruth paid $300 for a call option on 100 shares of stock. The option gives her the right to buy the stock for $37 per share until April 1
On March 15, the stock rises to $42 per share, and Ruth exercises her option, purchases the stock and then sells it in the market. What is Ruth's return on the option?
A) 167%
B) 67%
C) 100%
D) 150%
Answer: B
Explanation: B)
Amount received from selling stock ($42 × 100 shares) = $4,200
Amount paid for stock ($37 × 100 shares) = -$3,700
Amount paid for premium - $300
Net Gain $200/$300 premium = 67%
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