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:

Worksheet

A paper or electronic document used to organize and simplify accounting information before the preparation of financial statements.

Owner's Drawings

Withdrawals of business assets by the owner for personal use.

Income Summary

An account in which revenues and expenses are summarized, showing the net income or loss for a specific period before closing entries are made.

Net Income

Net income is the total revenue minus total expenses of a business, showing the company's profit during a specific period.