Several Rumors Concerning Wyslow,Inc

question 10

Multiple Choice

Several rumors concerning Wyslow,Inc. stock have started circulating. These rumors are causing the market price of the stock to be quite volatile. Given this situation,you decide to buy both a one-month put and a one month call option on this stock with an exercise price of $15. You purchased the call at a quoted price of $.20 and the put at a price of $2.10. What will be your total profit or loss on these option positions if the stock price is $4 on the day the options expire?

• A) -$230
• B) $870
• C) $890
• D) $910
• E) $1,310

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Definitions:

Implicit Costs

Indirect expenses that do not involve a direct cash outlay but represent an opportunity cost, such as using resources for one purpose over another.

Average Product

The output per unit of input, such as the number of goods produced per worker, used to measure productivity efficiency.

Marginal Product

The additional output that is produced by employing one more unit of a factor of production, holding other factors constant.

Total Product

The overall quantity of output that a firm produces, typically over a specific period, given a certain level of input.