At Expiry, a Holder of a Call Option with an Exercise

question 61

Multiple Choice

At expiry, a holder of a call option with an exercise price of $32 (purchased for a premium of $0.85) over Wesfarmers shares (now trading at $33.65) will:

• A)exercise with a profit of $1.65 per share
• B)exercise with a profit of $0.80 per share
• C)exercise with a profit of $0.85 per share
• D)not exercise with a loss of $0.85 per share.
• E)None of these.

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Definitions:

Exhibitors

Refers to businesses or individuals that present artistic or educational materials, such as films or artworks, to the public.

House Un-American Activities Committee

A committee of the U.S. House of Representatives, established in 1938, that conducted investigations into alleged disloyalty and subversive activities on the part of private citizens, public employees, and those organizations suspected of having Communist ties.

Paramount Decision

A 1948 United States Supreme Court decision that effectively broke up the studio trusts by forcing divestiture, the sale of the studios’ movie theaters.

Vertical Integration

A business practice where a company controls multiple stages of production, distribution, or both within the same industry, often to increase that company’s power in the marketplace.