An Investor Purchases a Call Option for $5 Per Share

question 1

Multiple Choice

An investor purchases a call option for $5 per share in a stock currently selling for $24 per share. The exercise price is $30 per share. On the day the option expires, the stock is selling for $29 per share. What will the investor do? What is the investor's total gain or loss?

• A) Exercise the option; total gain $500
• B) Allow the option to expire; total gain $500
• C) Allow the option to expire; total loss $500
• D) Exercise the option; total loss $100

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