Exhibit 13-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\$ 3.25$

question 79

Multiple Choice

Exhibit 13-4
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Rick Thompson is considering the following alternatives for investing in Davis Industries, which is now selling for $44 per share: 1) Buy 500 shares, and
2) Buy six month call options with an exercise price of 45 for $\$ 3.25$ premium.
-Refer to Exhibit 13-4. Assuming no commissions or taxes, what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?

• A) 9.54% loss
• B) 95.45% loss
• C) 0.9545% gain
• D) 95.45% gain
• E) 9.54% gain

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Definitions:

Government-Mandated

Regulations or requirements imposed by governmental bodies that must be followed by individuals, businesses, or other organizations.

Demand Curves

A graphical representation showing how the quantity demanded of a good or service varies with its price.

Supply Curves

A graphical representation of the relationship between the price of a good and the quantity of the good supplied by producers.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, when capital goods are distributed in the most beneficial manner among the population.