Ahmad Bought Call Options on Home Depot with a Strike

question 41

Multiple Choice

Ahmad bought call options on Home Depot with a strike price of $130. The option premium was $6.68. Just before the contract expired, Home Depot stock was $135 per share. Ahmad

• A) made a profit of $1.68 per share.
• B) lost $6.68 per share because the option would not be exercised.
• C) made a profit of $6.68 per share.
• D) lost $1.68 per share.

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Definitions:

Salvage Value

The anticipated market value of an asset after its period of utility has ended.

Payback Period

The duration required for an investment to produce income or cash flow that matches the investment's initial cost.

Incremental Net

The net change in financial outcomes resulting from a particular decision or action, considering only the relevant costs and benefits.

Useful Life

Useful life is the estimated time period that an asset is expected to be useful for the operations of a business before it is fully depreciated.