Several Rumors Concerning Value Rite Stock Are Causing the Market

question 91

Multiple Choice

Several rumors concerning Value Rite stock are causing the market price of the stock to be quite volatile.Given this situation,you decide to buy both a one-month European $25 put and a one-month European $25 call on this stock.The call price per share is $0.60 and the put price per share is $2.10.What will be your net profit or loss on these option positions if the stock price is $18 on the day the options expire? Ignore trading costs and taxes.

• A)-$210
• B)-$150
• C)-$60
• D)$430
• E)$490

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Definitions:

Significant Effect

A notably large or important impact or influence on a situation, process, or condition.

Utilitarian Philosophy

An ethical theory suggesting that the best action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Preventing Crime

Actions or strategies designed to stop criminal activities before they occur.

Draconian

is an adjective describing extremely harsh and severe laws or measures, originally referring to the rigorous code of Draco in ancient Athens.