How Much Must the Stock Be Worth at Expiration in Order

question 75

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

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Definitions:

Total Income

The sum of all revenue and gains for an entity over a specified period of time.

Present Value

The present value of a future amount of money or a series of future cash flows, discounted at a specific rate of return.

Internal Rate of Return

The discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.