An Investor Purchases a Call Option and Its Underlying Share

question 59

Multiple Choice

An investor purchases a call option and its underlying share on the same day. If the share appreciates by 25%, the call option will appreciate by

• A)less than 25%.
• B)exactly 25%.
• C)more than 25%.
• D)None of the above.

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Definitions:

Demand Loan

A loan wherein the lender is entitled to demand full repayment at any time without notice.

Compounded Quarterly

Interest calculated on an investment or debt four times a year.

Population Decrease

A decline in the number of people living in a specific area, often due to factors like emigration, lower birth rates, or increased mortality rates.

Quarterly Compounded

A method where interest is calculated and added to the principal balance four times a year.