Suppose the Price of a Share of IBM Stock Is

question 35

Multiple Choice

Suppose the price of a share of IBM stock is $200.An April call option on IBM stock has a premium of $5 and an exercise price of $200.Ignoring commissions, the holder of the call option will earn a profit if the price of the share

• A)increases to $204.
• B)decreases to $190.
• C)increases to $206.
• D)decreases to $196.
• E)None of the options

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Definitions:

Tie-In Sale

A sales technique where customers are encouraged to buy additional products related to their initial purchase.

Financially-Disappointing

Describes a situation, outcome, or performance that fails to meet the expected financial goals or returns.

Popular TV Show

A television program that attracts a large audience and considerable viewership, often becoming a significant part of popular culture.

Clayton Act

Prohibits the practice of tie-in sales when they substantially lessen competition.