A Speculator Purchased a Call Option with an Exercise Price

question 6

Multiple Choice

A speculator purchased a call option with an exercise price of $31 for a premium of $4. The option was exercised a few days later when the stock price was $34. What was the return to the speculator?

• A)25 percent
• B)- 25 percent
• C)- 3.2 percent
• D)- 2.9 percent

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Definitions:

Logical Extensions

Developments or conclusions that logically follow from a set of premises or fundamentals.

Inflections

Changes in the form of words to express different grammatical categories such as tense, mood, voice, aspect, person, number, gender, and case.

Theory-Theory

The idea that humans naturally construct theories to explain and predict others’ behavior based on their observations of the world, similar to how scientists develop theories.

Pragmatics

The branch of linguistics dealing with the use and function of language in context and the social rules governing language use.