Assume That You Have Just Sold a Stock for a Loss

question 55

Multiple Choice

Assume that you have just sold a stock for a loss at a price of $75 for tax purposes. You still wish to maintain exposure to the sold stock. Suppose that you buy a call with a strike price of $70 and a price of $6.75. Calculate the effective price paid to repurchase the stock if the price after 35 days is $65.

• A) $71.75
• B) $76.75
• C) $58.25
• D) $81.75
• E) $85.25

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Definitions:

Methanol

Known as wood alcohol, it is the simplest form of alcohol with uses ranging from solvent and antifreeze to fuel and industrial feedstock.

Grignard Reagent

A reactive compound composed of magnesium bonded to a halogen-containing carbon group, used mainly in organic syntheses.

Nucleophile

A chemical species that donates an electron pair to an electrophile to form a chemical bond in reaction mechanisms, often characterized by its negative charge or lone pair of electrons.

Electrophile

A species that is attracted to electrons and can accept an electron pair to form a bond.