Suppose a Financial Manager Buys Call Options on 45,000 Barrels

question 12

Multiple Choice

Suppose a financial manager buys call options on 45,000 barrels of oil with an exercise price of $30 per barrel. She simultaneously sells a put option on 45,000 barrels of oil with the same exercise price of $30 per barrel. Her net profit per barrel is _____ if the price per barrel is $29 and _____ if the price per barrel is $35.

• A)-$5; $1
• B)-$1; $0
• C)$0; -$1
• D)$0; $1
• E)-$1; $5

Recognize and avoid plagiarism by properly citing sources.

Comprehend the correct use of quotation marks with direct quotations.

Discern the necessity of including author, title, and source in summaries and paraphrases.

Identify the elements that should and should not appear in a summary.

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Definitions:

Equitable

Pertains to fairness or justice in the way people are treated or how resources are distributed.

Utilities Possibilities Frontier

A graphical representation showing the maximum amount of two or more goods or services that can be produced given a set of resources, highlighting the trade-offs and opportunity costs.

Equity

Fairness or justice in the way people are treated or how resources are distributed.

Efficiency

The optimal use of resources to achieve the desired outcome with minimal waste or expense, often associated with productivity and economic contexts.