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

question 64

Multiple Choice

Suppose you purchase a call option for $5 and an exercise price of $40. On the expiration day, the price of the share is $55. What is the return on the call option if you hold your position until maturity?

• A)200%
• B)300%
• C)275%
• D)125%

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Definitions:

Machine Division

A specialized segment within a manufacturing operation focused on the use of machines for production purposes.

Logistics Department

The division within a company responsible for the management of the movement of goods and services from suppliers to customers.

Operating Divisions

Distinct segments within a company, each responsible for certain operations or business units.

Fixed Costs

Outlays that do not fluctuate with production or sales figures, such as office rent, salary payments, and insurance policies.