Suppose That You Purchased a Call Option on the S&P

question 27

Multiple Choice

Suppose that you purchased a call option on the S&P 100 index.The option has an exercise price of 680 and the index is now at 720.What will happen when you exercise the option?

• A)You will have to pay $680.
• B)You will receive $720.
• C)You will receive $680.
• D)You will receive $4,000.
• E)You will have to pay $4,000.

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Definitions:

Market

A place or system where buyers and sellers interact to exchange goods, services, or information, determining prices through supply and demand.

Competitive Market Economy

An economic system where businesses compete freely without undue interference, allowing supply and demand to determine prices and outputs.

Entrepreneur

An individual who organizes and operates a business, taking on greater than normal financial risks in order to do so.

Satisfaction Per Dollar

A measure of the utility or enjoyment a consumer receives from a product or service relative to its cost.