Exhibit 20 $\$ 3.25$ Premium
-Refer to Exhibit 20

question 99

Multiple Choice

Exhibit 20.4
Use the Information Below for the Following Problem(S)
Rick Thompson is considering the following alternatives for investing in Davis Industries which is now selling for $44 per share:
(1) Buy 500 shares, and
(2) Buy six month call options with mexercise price of 45 for $\$ 3.25$ premium
-Refer to Exhibit 20.4.Assuming no commissions or taxes,what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?

• A) 9.54% loss
• B) 95.45% loss
• C) 0.9545% gain
• D) 95.45% gain
• E) 9.54% gain

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Definitions:

Sample Size

The number of observations or elements selected from a population to be included in a statistical sample.

Reduce β

In statistics, it generally refers to decreasing the coefficient (β) in a regression model to address overfitting or multicollinearity.

Power of the Test

The probability of correctly rejecting a false null hypothesis in a statistical test.

Test Statistic

A value calculated from sample data during a hypothesis test, used to decide whether to reject the null hypothesis.