Warnes Motors' Stock Is Trading at $20 a Share

question 6

Multiple Choice

Warnes Motors' stock is trading at $20 a share.Three-month call options with an exercise price of $20 have a price of $1.50.Which of the following will occur if the stock price increases 10% to $22 a share?

• A) The price of the call option will increase by $2.
• B) The price of the call option will increase by less than $2,but the percentage increase in price will be more than 10%.
• C) The price of the call option will increase by less than $2,and the percentage increase in price will be less than 10%.
• D) The price of the call option will increase by more than $2.
• E) The price of the call option will increase by more than $2,but the percentage increase in price will be less than 10%.

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Definitions:

Secondary Stimulus

A stimulus that acquires the capacity to evoke a conditioned response after being paired with a primary stimulus.

Acquisition

The process of learning or obtaining new information, skills, or responses, as in the initial stage of conditioning in psychology.

Electric Shock

A sudden discharge of electricity through a part of the body, causing injury or involuntary muscle contraction.

Flatworm

A type of simple invertebrate animal with a flat, soft body, many of which are parasites or live in water.