An Investor Is Committed to Purchasing 100 Shares of World

question 47

Multiple Choice

An investor is committed to purchasing 100 shares of World Port Management stock in six months. She is worried the stock price will rise significantly over the next 6 months. The stock is at $45 and she buys a 6-month call with a strike of $50 for $250. At expiration the stock is at $54. What is the net economic gain or loss on the entire stock/option portfolio?

• A) -$500
• B) -$750
• C) -$900
• D) $400
• E) $500 [[($45 - $54) * 100] + (($54- $50) * 100)] - $250 = -$750