If an Investor Buys a Dupont Put for $2

question 41

Multiple Choice

If an investor buys a Dupont put for $2.50 maturing in three months with a strike price of $50, what is the rate of return if Dupont is currently trading at $51.75 but falls to $46 at expiration?

• A) 30%
• B) 40%
• C) 50%
• D) 60%

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Definitions:

Commercial Banks

Depository institutions that historically made short-term loans primarily to businesses.

Loans

Borrowed sums of money that need to be repaid with interest over a predetermined period.

Depository Institution

A financial institution that accepts deposits from the public and provides credit facilities.

Credit Union

A member-owned financial cooperative that is created and operated by its members and provides credit at competitive rates as well as other financial services to its members.