Today, You Are Buying a One-Year Call on JKL Stock

question 142

Multiple Choice

Today, you are buying a one-year call on JKL stock with a strike price of $40 along with a one-year risk-free asset which pays 6 percent interest. The cost of the call is $2.40 and the amount invested
In the risk-free asset is $37.74. How much profit will you earn if the stock has a market price of $44
One year from now?

• A) -$0.14
• B) $1.60
• C) $3.20
• D) $3.86
• E) $4.00

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Definitions:

Multiple Sourcing

The strategy of procuring a particular product or service from more than one supplier in order to reduce dependency on any single source and increase reliability and competitiveness.

Bottleneck Items

Items or stages in a process that significantly delay production or throughput due to their limited capacity or efficiency.

Total Cost of Ownership

Encompasses the comprehensive assessment of the direct and indirect expenses associated with acquiring and operating a product or system over its entire lifespan.

Acquisition Time

The duration it takes from recognizing a need for goods or services until they are fully delivered and operational.