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

question 20

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 reaches $50 in four months and a call was purchased?

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

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Definitions:

Double Taxation

A taxation principle referring to income taxes paid twice on the same source of earned income; it can occur when income is taxed at both the corporate level and personal level.