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
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Q5
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?
Transcribed Image Text: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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