Option Payoffs: Haumer Hardware Co

question 10

Multiple Choice

Option payoffs: Haumer Hardware Co. stock is currently trading at $20. There are two types of options written on the stock. Call options with a strike price of $20, which expire next year, are currently trading at $8. Put options with a strike price of $20, which expire next year, are currently trading for $2. Steve invests $120 in common stock. Carol invests $120 in the call options. Paul invests $120 in the put options. At the end of one year the price of Haumer Hardware Co. stock is $18. Who made the most money off of their investment?

• A) Steve
• B) Carol
• C) Paul
• D) Steve and Carol tied

---

Definitions:

Placebo Effect

The beneficial effect on an individual resulting from a placebo treatment, which arises from the patient's expectations rather than the treatment itself.

Survey

A method of gathering information from a large group of people, typically by asking them questions.

Masked Design

An experiment in which participants do not know whether they are in the experimental or the control condition. Previously called a blind design.

Researcher's Expectations

The preconceived notions or hypotheses that a researcher may have before conducting an experiment or study.