What Is the Total Option Premium You Will Receive If

question 8

Multiple Choice

What is the total option premium you will receive if you sell 5 June $25.00 calls on Texas Instruments?

• A) $90
• B) $850
• C) $1,640
• D) $2,170
• E) $3,250

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Definitions:

Initial Investment

Initial investment is the initial amount of money spent to start a project, purchase an asset, or embark on a new business venture.

Profitability Index

A financial tool used to measure the relative profitability of an investment, calculated by dividing the present value of future cash flows by the initial investment cost.

Internal Rate

Typically refers to the internal rate of return (IRR), which is a rate of return used in capital budgeting to measure and compare the profitability of investments.

Preference Decisions

Choices made between alternatives based on preferences for certain criteria or outcomes.