Grant Purchased One Call on XYZ Shares at an Exercise

question 17

Multiple Choice

Grant purchased one call on XYZ shares at an exercise price of $25. The market price of XYZ shares when Grant purchased the call was $24 a share. XYZ is currently priced at $30 a share. Grant paid $120 to buy the call. How much profit will Grant make if he exercises the option today and then sells the shares? Ignore all transaction- related costs.

• A) $500.
• B) $480.
• C) $380.
• D) $600.

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Definitions:

Specialization

The division of labor into small, specific tasks and the assignment of employees to do a single task.

Boredom

A state of feeling disinterested, restless, or unenthused about an activity or situation, often due to a lack of stimulation or engagement.