A 6-month call option on 100 shares of SRS Corp. stock is selling for $300. The strike price for the option is $40. The stock is currently selling at $38 per share. Ignoring brokerage fees, what price must the stock achieve to just cover the expense of the option? If the

A 6-month call option on 100 shares of SRS Corp. stock is selling for $300. The strike price for the option is $40. The stock is currently selling at $38 per share. Ignoring brokerage fees, what price must the stock achieve to just cover the expense of the option? If the

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

A 6-month call option on 100 shares of SRS Corp.
stock is selling for $300. The strike price for the option
is $40. The stock is currently selling at $38 per share.
Ignoring brokerage fees, what price must the stock
achieve to just cover the expense of the option? If the
stock price rises to $45, what will the net profit on the
option contract be?

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