What Is the Profit Per Share for an Investor Who

question 50

Multiple Choice

What is the profit per share for an investor who has purchased a share of stock and two put options with an exercise price of $40, given that the purchase price of the stock was $42, each put cost $2 per share, and the stock was valued at $30 at expiration?

• A)($16)
• B)($6)
• C)($4)
• D)$4 profit per share = value of stock at expiration + 2(value of put at expiration) - price of stock - 2(put premium)
• = 30 + 2(40 - 30) - 42 - 2(2)

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Definitions:

Common Stock

A type of equity security representing ownership in a corporation, with rights to vote on corporate matters and receive dividends.

Shares Outstanding

This key term represents the aggregate number of issued shares of a corporation held by investors, including restricted shares owned by the company’s officers and insiders.

Reverse Stock Split

A corporate action that reduces the number of a company's outstanding shares and increases the share price proportionately.

Shares Outstanding

The cumulative amount of shares of a company presently held by all shareholders, encompassing large quantities owned by institutional investors and private shares held by company insiders.