RTF Stock Is Currently Priced at $21

question 28

Multiple Choice

RTF stock is currently priced at $21.06 a share.The only options on this stock are the August $25 call option,which is priced at $.32,and the August $25 put which is priced at $3.98.Flo would like the option to purchase 500 shares of RTF should the price suddenly rise as she expects.Her main concern is that the price will double after hours and she will miss out on some potential profits.She also realizes the stock is highly risky,and she could lose her entire investment,which she prefers not to do.What should she do to help offset her concerns?

• A)Sell 500 put option contracts and receive $1,990
• B)Sell five call option contracts and receive $1.60
• C)Buy 500 call option contracts at a cost of $160
• D)Buy five put option contracts at a cost of $19.90
• E)Buy five call option contracts at a cost of $160

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Definitions:

Cross-Cultural Psychologist

A psychologist who studies the ways cultural context influences human behavior and mental processes.

Biopsychologist

A scientist who studies the interaction between biological processes and psychological phenomena.

Naturalistic Observation

A research method in which subjects are observed in their natural environment without intervention by the researchers.

Phylogenetic Scale

A hierarchical system that classifies organisms based on their evolutionary relationships.