Suppose That a Stock Sells at a Price of $40

question 51

Multiple Choice

Suppose that a stock sells at a price of $40 on the expiration date. Compute the payoff to the seller of a call option if the option strike price is $50.

• A) -$20
• B) -$10
• C) 0
• D) $20

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Definitions:

Dividends

Profits distributed by a corporation to its shareholders based on the number of shares they own.

Corporate Profits

The earnings of a corporation after all expenses have been deducted from revenues.

Shareholders

Individuals or entities that own one or more shares of stock in a public or private corporation, thus having a financial interest in its performance.

Nonprofit Corporations

Organizations that operate for charitable, educational, religious, or public service objectives, not for profit, and often eligible for tax-exempt status.