Nico Yong Is Considering the Purchase of 100 Cisco Systems

question 12

Essay

Nico Yong is considering the purchase of 100 Cisco Systems shares at $22 per share. Because the economy is picking up, Nico believes the demand for Oracle's router systems will increase substantially causing the price of Cisco's shares to increase to $30 per share. As an alternative, Nico is considering the purchase of a call option for 100 shares of Cisco at with an exercise price of $25. This 180 day option will cost Nico $200. Ignore transaction costs and dividends. What will Nico's profit be on the share transaction if he decides to buy the stock and its price does increase to $30 per share and he sells?

---

Definitions:

Good Faith Bargaining

The principle of negotiating honestly and sincerely without the intention to deceive.

Breach of Contract

The inability to fulfill any condition of a contract, whether it's documented or verbal, without a valid legal reason.

Unlawful Strike

A work stoppage by employees that violates relevant labor laws or agreements.

Labour Relations Act

Legislation that regulates the relationship between employers and employees, including union rights and collective bargaining.