The Price of a Stock on July 1 Is $57

question 9

Multiple Choice

The price of a stock on July 1 is $57.A trader buys 100 call options on the stock with a strike price of $60 when the option price is $2.The options are exercised when the stock price is $65.The trader's net profit is

• A) $700
• B) $500
• C) $300
• D) $600

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Definitions:

Common Stock

Common Stock represents ownership shares in a corporation, giving holders voting rights and a share in the company’s profits via dividends.

Cost Method

An accounting approach where investments are recorded at their acquisition cost, without subsequent change for market value fluctuations.

Liquidated

The process of converting assets into cash or using them to pay off liabilities in the event of a business closure, bankruptcy, or when assets are no longer needed.

Subsidiary Company

A company that is completely or partly owned and partly or wholly controlled by another company, known as the parent company.