The Price of ABC Stock Is Currently $42 Per Share

question 13

Multiple Choice

The price of ABC stock is currently $42 per share, but in six months you expect it to rise to $50. ABC does not pay a dividend. You buy a six-month call on ABC, with a strike price of
$45) The option cost $200. What holding period return do you expect on this call? Ignore transaction costs and taxes.

• A) 150%
• B) 200%
• C) 250%
• D) 300%

---

Definitions:

Distribution

Refers to the way in which something is shared out among a group or spread over an area.

Alternative Hypothesis

The hypothesis that proposes there is a statistically significant difference between two or more sets of data, contrasting the null hypothesis.

Region of Rejection

The range of values for which the null hypothesis is rejected in favor of the alternative hypothesis in hypothesis testing.

p < .05

Indicates that the probability of the observed data occurring under the null hypothesis is less than 5%, suggesting statistical significance.