Suppose You Purchase a Call Option for $4 and a Strike

question 50

Multiple Choice

Suppose you purchase a call option for $4 and a strike price of $30. On the expiration day, the price of the stock is $40. What is the return on the call option if you hold your position until maturity?

• A) 125%
• B) 130%
• C) 150%
• D) 170%

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Definitions:

Dividend Yield

The ratio of a company's annual dividend payments to its share price, indicating the earning potential from dividends for investors.

Required Return

An annual return rate set as the minimum to attract investment from persons or entities into a specific security or project.

Dividend Growth Rate

The annualized percentage rate of growth of a company's dividends per share.

Dividend Amount

Dividend amount is the sum paid to shareholders out of a company's earnings, typically on a per-share basis.