USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 56

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Rick Thompson is considering the following alternatives for investing in Davis Industries, which is now selling for $44 per share:

-Refer to Exhibit 14.2. Assuming no commissions or taxes, what is the annualized percentage gain if the stock reaches $50 in four months and a call was purchased?

• A) 161.54 percent gain
• B) 53.85 percent gain
• C) 161.54 percent loss
• D) 11.11 percent gain
• E) 53.85 percent loss

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Definitions:

Current

Pertaining to the present time or most recent; also refers to a flow of electricity through a conductor.

Past

Refers to all events or periods that have occurred before the present time, often studied in the context of history to understand patterns of change and development.

Possible

Capable of happening or existing under the right circumstances.

Impossible

That which cannot occur, exist, or be done; a situation or condition not feasible within the current laws of physics or reality.