You Are Cautiously Bullish on the Common Stock of the Wildwood

question 82

Multiple Choice

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes:
-If in June the stock price is $53 your net profit on the bull money spread would be ________.

• A) $300
• B) -$400
• C) $150
• D) $50

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Definitions:

Pollution Abatement

The reduction or elimination of pollutants released into the environment, often through regulatory policies or technology changes.

Pigouvian Tax

A tax imposed on activities that generate negative externalities, aiming to correct an inefficient market outcome by increasing the cost to include the external costs.

CFCs

Chlorofluorocarbons; chemical compounds used in aerosol sprays and refrigerants that have been found to deplete the ozone layer.

Adverse Selection

A situation in which one party in a transaction has more information than the other, often leading to the selection of poorer-quality goods or higher-risk individuals.