Suppose You Purchase a Call Option on Asset XYZ That

question 4

Multiple Choice

Suppose you purchase a call option on Asset XYZ that has an exercise price of $50. The option price is $2 per share. Suppose that on the expiration date, the current price is $50. What is your net profit or loss per share?

• A) -$2.00
• B) $0.00
• C) $1.00
• D) $2.00

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Definitions:

Transferring Risk

Shifting potential financial loss to another party through mechanisms like insurance, hedging, or outsourcing, to manage vulnerability to risk.

Investing

The process of distributing funds or resources with the aim of earning a return or profit.

Interest Income

Income earned from deposit accounts or investments that pay interest, such as bonds and savings accounts.

Financial Assets

Assets that derive value from a contractual claim, such as stocks, bonds, bank deposits, and other investments.