Carl Is an Option Writer

question 89

Multiple Choice

Carl is an option writer. In anticipation of a depreciation of the British pound from its current level of $1.50 to $1.45, he has written a call option with an exercise price of $1.51 and a premium of $.02. If the spot rate at the option's maturity turns out to be $1.54, what is Carl's profit or loss per unit (assuming the buyer of the option acts rationally) ?

• A) -$.01
• B) $.01
• C) -$.04
• D) $.04
• E) -$.03

Calculate the market rate of return based on stock's current yield and constant dividends.

Understand the valuation of stocks that do not currently pay dividends but will in the future.

Calculate the required rate of return for preferred stock investments.

Determine the dividend yield of a stock and its impact on total return.

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Definitions:

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A phrase indicating that a container's cover is securely in place; often used metaphorically to suggest maintaining control or secrecy.

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The method by which documents are systematically organized and stored for easy retrieval and reference.

Filing Equipment

Tools or systems used for organizing, storing, and managing files or documents in both physical and digital formats.

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Documented information pertaining to a patient's medical history, treatments received, diagnostic tests, and health outcomes, used for managing patient care.