Exhibit 20 $\$ 3.25$ Premium
-Refer to Exhibit 20

question 99

Multiple Choice

Exhibit 20.4
Use the Information Below for the Following Problem(S)
Rick Thompson is considering the following alternatives for investing in Davis Industries which is now selling for $44 per share:
(1) Buy 500 shares, and
(2) Buy six month call options with mexercise price of 45 for $\$ 3.25$ premium
-Refer to Exhibit 20.4.Assuming no commissions or taxes,what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?

• A) 9.54% loss
• B) 95.45% loss
• C) 0.9545% gain
• D) 95.45% gain
• E) 9.54% gain

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Definitions:

Transmission Division

A segment within a company or industry that specializes in the development, production, and maintenance of transmission systems.

Return On Investment (ROI)

A financial metric that calculates the profitability of an investment by dividing the profit gained from an investment by its cost.

Net Operating Income

A measure of a company's financial performance, calculated as revenues minus expenses from operations, not including non-operating income and expenditures.

Operating Assets

Assets employed in the day-to-day operations of a business that are expected to generate economic benefits, including both current and non-current assets.