You Bought Five Call Option Contracts with a Strike Price

question 83

Multiple Choice

You bought five call option contracts with a strike price of $47.50 and an option premium of $1.20.At expiration,the stock was selling for $51.30 a share and you exercised your option.What is your total cost basis in the acquired shares?

• A) $23,150
• B) $25,050
• C) $23,750
• D) $24,350
• E) $26,250

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Definitions:

MR = MC

This equation represents the profit-maximizing condition in economics where marginal revenue (MR) equals marginal cost (MC), often used to determine the optimal level of output.

Competitive Price-searcher

A market participant who actively compares prices among competitors to find the best possible deal, often in markets with imperfect competition.

Short-run Losses

Financial losses that a firm experiences within a limited time period, usually due to fixed costs and market conditions.

Industry Entry

The process or act of starting a new venture or entering a market as a new competitor.