The Price of ABC Stock Is Currently $42 Per Share

question 13

Multiple Choice

The price of ABC stock is currently $42 per share, but in six months you expect it to rise to $50. ABC does not pay a dividend. You buy a six-month call on ABC, with a strike price of
$45) The option cost $200. What holding period return do you expect on this call? Ignore transaction costs and taxes.

• A) 150%
• B) 200%
• C) 250%
• D) 300%

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Definitions:

Defenestration of Prague

A historical incident in 1618 where two Catholic officials were thrown out of a window in Prague, sparking the Thirty Years' War.

Rudolf II

A Holy Roman Emperor known for his patronage of arts and sciences, and his role in the religious conflicts of his time, reign from 1576 to 1612.

Holy Roman Emperor

The ruler of the Holy Roman Empire, a political entity in Central Europe from the 9th to the 19th century, not directly analogous to the ancient Roman Empire.

Industrial Revolution

A period of major industrialization from the late 18th to mid-19th century that transformed mainly agrarian, rural societies in Europe and America into industrialized, urban ones.