Several Rumors Concerning Value Rite Stock Are Causing the Market

question 91

Multiple Choice

Several rumors concerning Value Rite stock are causing the market price of the stock to be quite volatile.Given this situation,you decide to buy both a one-month European $25 put and a one-month European $25 call on this stock.The call price per share is $0.60 and the put price per share is $2.10.What will be your net profit or loss on these option positions if the stock price is $18 on the day the options expire? Ignore trading costs and taxes.

• A)-$210
• B)-$150
• C)-$60
• D)$430
• E)$490

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Definitions:

Ratio of Debt

A financial metric that measures the amount of debt a company has compared to its assets or equity, indicating the financial leverage or risk.

Accounting System

A systematic process of recording, reporting, and analyzing financial transactions of a business.

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