You Know for Certain That a Common Share of Mystical

question 88

Multiple Choice

You know for certain that a common share of Mystical Inc., worth $25 today, will be worth $55 one month from now. The stock pays no dividends. Which of the following actions would maximize your
Return on investment (assuming no transaction costs) ?

• A) Purchase a call option with a strike price of $55.
• B) Purchase warrants on the stock (totaling 100 shares) with a strike price of $35.
• C) Purchase a put option on the stock with a strike price of $30.
• D) Purchase 100 shares of the stock at the current price of $25 per share.
• E) Purchase a call option on the stock with a strike price of $25.

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Definitions:

Misappropriation

The unauthorized, improper, or illegal use of resources, often involving funds or property entrusted to an individual's care.

Cognitive Ability

The capacity to perform mental processes such as thinking, reasoning, and problem-solving.

Verbal Skills

The ability to express ideas effectively and communicate information through spoken words.

Quantitative Skills

The ability to handle and analyze numerical data effectively.