How Much Must the Stock Be Worth at Expiration in Order

question 37

Multiple Choice

How much must the stock be worth at expiration in order for a call holder to break even if the exercise price is $50 and the call premium was $4?

• A)$46
• B)$50
• C)$52
• D)$54 profit from call = stock value - exercise price - premium
• 0 = stock value - 50 - 4

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Definitions:

Building

A structure with walls and a roof, such as a house or factory, intended for use or occupancy.

AASB 11

An accounting standard that sets out the financial reporting requirements for entities that have an interest in arrangements that are controlled jointly (joint arrangements).

Joint Control

A situation where the strategic financial and operating policy decisions of a business arrangement are determined by unanimous consent of the parties sharing control.

Unilateral Control

The power exerted by one entity over another without the need for mutual agreement or cooperation.