Braddock Construction Co

question 5

Multiple Choice

Braddock Construction Co.'s stock is trading at $20 a share.Call options that expire in three months with a strike price of $20 sell for $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 more than $2.
• B) The price of the call option will increase by less than $2, and the percentage increase in price will be less than 10%.
• C) The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10%.
• D) The price of the call option will increase by more than $2, but the percentage increase in price will be less than 10%.
• E) The price of the call option will increase by $2.

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Definitions:

Equity Theory

A theory of motivation that proposes individuals are motivated by a sense of fairness in the reward-to-effort ratio compared to others.

Reward Theory

A psychological theory that suggests human behavior is motivated by the desire for rewards or incentives.

Opposites Attract Theory

The hypothesis that individuals are attracted to others with different personality traits or physical attributes than themselves.

Interpersonal Attraction

The force that draws people together and creates the desire for ongoing social interaction, which can be based on physical appearance, similarity, or other factors.