A call option on 100 shares of stock is purchased for a premium of $400. The current price of the stock is $42 per share, and the exercise price is $44 per share. The option is exercised when the stock is selling for $50 per share
What would be your return on the option if after exercising it, you immediately sold the stock at the market price of $50 per share? Ignore taxes and brokerage commissions.
A) 8%
B) 12%
C) 50%
D) 200%
Answer: C
Explanation: C)
100 shares × $50 = $5,000 proceeds from sale
100 shares × $44 =-$4,400 cost to purchase shares
-$400 cost of option
$200 gain/$400 = 50 percent
You might also like to view...
The breakdown of glucose in cellular respiration is a catabolic reaction.
Answer the following statement true (T) or false (F)
The five levels of Maslow's hierarchy of needs theory, in order from lowest to highest, are:
a. Psychological, safety and security, acceptance, esteem, and self-actualization b. Physiological, safety and security, self-esteem, acceptance, and actualization c. Safety and security, psychological, acceptance, esteem, and self-actualization b. Physiological, safety and security, acceptance, esteem, and self-actualization
Consideration can be
a. a benefit to the offeror. b. a sacrifice by the offeree. c. performing an act. d. all of these.
Gary is a supervisor at a manufacturing company. He keeps accurate records of the company's production rates. He also plans the activities of his employees so that production lines operate at maximum efficiency. In the context of the classical understanding of management skills, Gary's abilities can be categorized under ________.
A. human relations skills B. technical skills C. decision-making skills D. conceptual skills