Suppose the Price of a Share of IBM Stock Is

question 32

Multiple Choice

Suppose the price of a share of IBM stock is $200.An April call option on IBM stock has a premium of $5 and an exercise price of $200.Ignoring commissions, the holder of the call option will earn a profit if the price of the share

• A)increases to $204.
• B)decreases to $190.
• C)increases to $206.
• D)decreases to $196.

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Definitions:

Stimulus Package

A set of government measures, typically involving spending and tax cuts, intended to boost economic activity during a downturn.

Great Recession

The severe global economic downturn that occurred from late 2007 through mid-2009, characterized by significant declines in economic activity worldwide.

Automatic Stabilizers

Automatic stabilizers are economic policies and programs, like unemployment insurance and progressive taxation, that automatically adjust to dampen economic fluctuations without additional government action.

Fair Tax

A proposed tax reform that suggests replacing current income and federal taxes with a single national sales tax to simplify the tax system.