What Is the Worst-Case Profitability Scenario for an Investor Who

question 75

Multiple Choice

What is the worst-case profitability scenario for an investor who sold a call on the firm's stock for a premium of $10 and a strike price of $100?

• A) $90 per share profit
• B) $10 per share profit
• C) $0 per share profit (break-even)
• D) Unlimited losses

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Definitions:

Economic Profits

The surplus remaining after total costs are deducted from total revenues, accounting for both explicit and implicit costs.

Productive Land Resources

Land areas that are utilized or capable of being utilized for agricultural production, mining, or other economic activities.

Purely Competitive Economy

An economic model characterized by many buyers and sellers in the market, with none able to influence prices significantly.

Pure Rent

The income derived from the inherent attributes of a resource or property, exclusive of any improvement made by human effort.