Assume an Insurance Company Purchases a Call Option on a Stock

question 44

Multiple Choice

Assume an insurance company purchases a call option on a stock index futures contract for a premium of 14, with an exercise price of 1800. The value of a stock index futures contract is 250 times the index. If the stock index on the futures contract increases to 1830, what is the gain on the sale of the futures contract?

• A)$15,000
• B)$7,500
• C)$3,300
• D)$4,000
• E)$1,500

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