Suppose You Purchase a Call Option for $5 and an Exercise

question 54

Multiple Choice

Suppose you purchase a call option for $5 and an exercise price of $20. On the expiration day, the price of the share is $30. What is the return on the call option if you hold your position until maturity?

• A)50%
• B)75%
• C)100%
• D)25%

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Definitions:

Risk Averse

A term describing individuals or entities that prefer to avoid risks, often opting for the option with the most predictable outcome.

Medicaid

A government healthcare program providing medical assistance to low-income individuals and families.

Medicare

A federal health insurance program in the United States for people aged 65 and older, and for some younger people with disabilities.

Health Benefits

The positive effects or outcomes on physical, mental, and social well-being obtained through healthcare services, good nutrition, exercise, and healthy lifestyle choices.