Warner Motors' Stock Is Trading at $20 a Share

question 10

Multiple Choice

Warner Motors' stock is trading at $20 a share.Call options that expire in three months with a strike price of $20 sell for $1.50.What will happen if the stock price increases 10%,to $22 a share?

• A)The price of the call option will increase by $2.
• B)The price of the call option will increase by less than $2, and the percentage increase in price will be less than 10%.
• C)The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10%.
• D)The price of the call option will increase by more than $2, but the percentage increase in price will be less than 10%.

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Definitions:

Intellectual Skills

The cognitive abilities related to thinking, reasoning, problem-solving, and learning.

Motor Skills

The abilities required to control the muscles of the body for movement, including both gross and fine motor skills.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired: a response which is at first elicited by the second stimulus is eventually elicited by the first stimulus alone.

Old Stimulus

A previously encountered stimulus that may trigger a familiar response or behavior due to past experiences.