A Speculator Buys a Call Option for $3, with an Exercise

question 51

Multiple Choice

A speculator buys a call option for $3, with an exercise price of $50. The stock is currently priced at $49, and rises to $55 on the expiration date. The speculator will exercise the option on the expiration date (if it is feasible to do so) . What is the speculator's profit per unit?

• A)$1
• B)$5
• C)$2
• D)-$1
• E)-$2

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Definitions:

Metacarpal Bones

The five long bones in the hand that are connected to the carpals (wrist bones) and the phalanges (fingers).

Palmaris Longus

A muscle of the forearm that is involved in the flexion of the wrist and can be used as a tendon graft site.

Latissimus Dorsi

A broad, flat muscle on the back that helps with movement of the shoulders and arms.

Pectoralis Major

A large muscle in the upper chest that aids in the movement of the shoulder joint, including flexion, rotation, and adduction of the arm.