A Call Option on 100 Shares of Stock Is Purchased

question 84

Multiple Choice

A call option on 100 shares of stock 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%
• B) 12%
• C) 50%
• D) 200%

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