Exhibit 22 -Refer to Exhibit 22

question 51

Multiple Choice

Exhibit 22.2
Use the Information Below for the Following Problem(S)
$$\begin{array} { c} &&\text{XYZ CORP}\\ & \quad\quad\quad\quad \text { Exercise } & & \quad\quad\quad\quad\quad\quad { \text { NYSE } } \\& \text { Date } & \text { Price } & \text { Price } & \text { Clase } \\\hline \text { Calls } & \text { OCT } & 85 & 163 / 4 & 101\quad11 / 16 \\& \text { OCT } & 90 & 12 & 101\quad11 / 16 \\& \text { OCT } & 95 & 75 / 8 & 101\quad11 / 16 \\\text { Puts } & \text { OCT } & 85 & 1 / 8 & 101\quad11 / 16 \\& \text { OCT } & 90 & 3 / 8 & 101\quad11 / 16 \\& \text { OCT } & 95 & 13 / 16 & 101\quad11 / 16\end{array}$$
-Refer to Exhibit 22.2.If you establish a long straddle using the options with a 95 exercise price,what is your dollar gain or loss if at expiration XYZ is still trading at 101 11/16?

• A) $668.75 gain
• B) $668.75 loss
• C) $94.56 gain
• D) $94.56 loss
• E) $81.25 loss

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Definitions:

Market Period

A period during which sellers are unable to change quantity offered for sale in response to a change in price.

Quantity Supplied

The amount of a product that producers are willing to supply at a given price.

Elasticity of Demand

This term measures how sensitively the quantity demanded of a good responds to a change in its price; a rephrased definition of Elasticity related to demand.

Very Inelastic

Describing a situation where the demand or supply for a good or service is largely unaffected by changes in price.