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A Call Option Is Purchased for a Premium of $400

question 80

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A call option is purchased for a premium of $400.The current price of the stock is $42 per share and the exercise price is $44 per share.The option is exercised when the stock is selling for $50 per share.What would be your return on the option if after exercising it,you immediately sold the stock at the market price of $50 per share? Ignore taxes and brokerage commissions.
(a)8 percent
(b)12 percent
(c)50 percent
(d)200 percent


Definitions:

Piagetian Terms

Concepts and terminology associated with the cognitive developmental theory of Swiss psychologist Jean Piaget, which focuses on how children's thinking evolves over time.

Accommodation

The process of adjusting or adapting cognitive schemas to integrate new information, or physical provisions made for housing.

Organization

The structured arrangement of components, applicable to entities ranging from businesses to biological systems, to achieve specific goals or functions.

Assimilation

The cognitive process in which new information is absorbed and integrated into pre-existing knowledge structures and frameworks.

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