USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 67

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for a common stock.

-Refer to Exhibit 16.7. Calculate the net value of a covered call position at an expiration stock price of $20.

• A) $1.85
• B) $4.45
• C) $18.15
• D) $21.85
• E) $24.35

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Definitions:

Consumption

Families or individuals partaking in the use of goods and services.

Interest Rate

The percentage of a sum of money charged for its use, often expressed on an annual basis.

Income

The financial benefit achieved regularly through employment or committing capital.

Utility Function

A mathematical representation in economics that assigns a value to each possible choice or bundle of goods to reflect the satisfaction or happiness a consumer derives from it.