Carl Purchased a Call Option on Apex Stock That Had

question 56

Multiple Choice

Carl purchased a call option on Apex stock that had a premium of $4, an exercise price of $25, and six-months to expiration. When he purchased the option, Apex was selling at $27 per share. What profit (per share) would Carl earn on his option transaction if Apex sells at $31 per share at expiration?

• A) $0
• B) $2
• C) $4
• D) $6

---

Definitions:

Nonrival

A characteristic of a good whereby its consumption by one individual does not reduce the amount available for consumption by others.

Strategic Behavior

Actions taken by firms or individuals with the aim of influencing the market or competitors to achieve a particular outcome or advantage.

Product Differentiation

A strategy that firms use to achieve market power. Accomplished by producing goods that differ from others in the market.

Barriers

Factors or conditions that obstruct entry into a market, restrict competition, or hinder business operations and growth.