An Investor Purchases a Call Option with an Exercise Price

question 8

Multiple Choice

An investor purchases a call option with an exercise price of $55 for $2.60.The same investor sells a call on the same security with an exercise price of $60 for $1.40.At expiration,3 months later,the stock price is $56.75.All other things being equal and given an annual interest rate of 4.0%,what is the net profit or loss to the investor?

• A) $1.21 loss
• B) $1.50 loss
• C) $0.54 gain
• D) $1.65 gain

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Definitions:

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The ongoing coordination and oversight of a business or organization's operations and activities on a day-to-day basis to ensure efficiency and effectiveness.

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Laws established by legislative bodies at the state level in the United States, governing various aspects of daily life and business operations.

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Individuals appointed or elected to oversee the management of a company and make key decisions.

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A formal legal document that represents a right or interest, such as a check, promissory note, or bond.