This topic contains a solution. Click here to go to the answer

Author Question: A call option on 100 shares of stock is purchased for a premium of $400. The current price of the ... (Read 223 times)

jilianpiloj

  • Hero Member
  • *****
  • Posts: 521

Question 1

An investor purchases 100 shares of stock for $20 per share. The stock has now risen in price to $44 per share. To cover potential losses, the investor purchases a put option for a premium of $300 with an exercise price of $42 per share. The stock falls to $28 per share, and the investor exercises the option and sells the shares at $42 per share. Ignoring brokerage commissions and taxes, what would be the investor's return from the stock?


◦ 120%
◦ 110%
◦ 95%
◦ 70%

Question 2

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.


◦ 8%
◦ 12%
◦ 50%
◦ 200%


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by jilianpiloj on Apr 14, 2019

frejo

  • Sr. Member
  • ****
  • Posts: 349
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 25% of students answer this correctly





 

Did you know?

As many as 20% of Americans have been infected by the fungus known as Histoplasmosis. While most people are asymptomatic or only have slight symptoms, infection can progress to a rapid and potentially fatal superinfection.

Did you know?

Though “Krazy Glue” or “Super Glue” has the ability to seal small wounds, it is not recommended for this purpose since it contains many substances that should not enter the body through the skin, and may be harmful.

Did you know?

Asthma-like symptoms were first recorded about 3,500 years ago in Egypt. The first manuscript specifically written about asthma was in the year 1190, describing a condition characterized by sudden breathlessness. The treatments listed in this manuscript include chicken soup, herbs, and sexual abstinence.

Did you know?

Individuals are never “cured” of addictions. Instead, they learn how to manage their disease to lead healthy, balanced lives.

Did you know?

Cyanide works by making the human body unable to use oxygen.

For a complete list of videos, visit our video library