Recently You Bought a Call and a Put Option on a Stock

question 41

Multiple Choice

Recently you bought a call and a put option on a stock with a common exercise price of $75.The call premium was $5 and the put premium was $3.You will make money from this position if the stock price is:

• A)greater than $75, but less than $78.
• B)greater than $75, but less than $80.
• C)greater than $72, but less than $75.
• D)less than $67, or greater than $83.

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Definitions:

Face Value

The original cost of a bond or the principal balance to be paid back at maturity, excluding interest.

Market Interest Rate

The prevailing rate at which interest is charged on loans and bonds in the broader financial market.

Bond Yield

The return an investor realizes on a bond, calculated by the coupon payments relative to the market price of the bond.

Face Value

The nominal or dollar value stated on a financial instrument, such as a bond or stock, representing its worth at issuance or maturity.