At expiry, a holder of a call option with an exercise price of $45 (purchased for a premium of $0.85) over Wesfarmers shares (now trading at $47.21) will: O not exercise with a loss of $0.85 per share O exercise with a profit of $1.36 per share O exercise with a loss of $1.36 per share O exercise with a profit of $2.21 per share

At expiry, a holder of a call option with an exercise price of $45 (purchased for a premium of $0.85) over Wesfarmers shares (now trading at $47.21) will: O not exercise with a loss of $0.85 per share O exercise with a profit of $1.36 per share O exercise with a loss of $1.36 per share O exercise with a profit of $2.21 per share

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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A short strangle was initiated with a strike price for the call at $70 and the strike price of the put at $80. The premium recieved for writing/selling the put was $12 and the premium received for writing/selling the call was $15. Within what range must the stock be at expiration to not lose money on this strangle?
On May 1, 2020, Sunco Limited purchased a call option from Moonco Corporation. The option gave Sunco the right to purchase shares in a third company, Galaxy Company. Sunco settled the options in cash on June 16, 2020. Following are additional details pertaining to the option: Number of shares that can be purchased with the call option 7,400 Call option exercise price per share $ 10.03 Market price per share of Galaxy Company on May 1, 2020 $ 10.03 Price paid by Sunco to purchase the option $ 1,800 Market price per share of Galaxy Company on May 31, 2020 $ 11.24 Fair value of call option on May 31, 2020 $ 9,200 Market price per share of Galaxy Company on June 16, 2020 $ 11.29 Fair value of call option on June 16, 2020 $ 8,800 Sunco has a year end of May 31. Required: Prepare the journal entries required on the books of Sunco Limited on each of the…
2
ABC Company's current stock price is $100. The risk-free rate is 4%. 38. The payoff to the holder of a call option on ABC with an exercise price of $200 is closest to: A. $100 if stock price at option expiration equals $200 B. Zero if stock price at option expiration equals $100 C. -S40 if stock price at option expiration equals $160
1. Three months ago an investment company bought for £8 a call option on a stock with an exercise price of £136. If the stock price at expiration of this option is £147. Select which of the following best describes the option value, the decision of the Investment Company and the return on investment thereon. A. Option value Decision Profit / (loss) % Exercise price – Stock price Exercise 37.5% B. Option value Decision Profit / (loss) % Stock price – Exercise price Don’t Exercise 2.2% C. Option value Decision Profit / (loss) % Exercise price – Stock price Exercise 2.2% D. Option value…
You buy 1 put contract with a strike price of $60 on a stock which you own 100 shares. What are the expiration total values for this position (100 stock shares plus 1 put contract) for prices of $50 and $60 if the put premium is $1.80?
Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a $50 strike and 90 days to maturity is quoted at $1.95. Compare the percentage gains and losses from a $97,500 investment in the stock versus the option in 90 days for stock prices of $40, $50, and $60. (Leave no cells blank - be certain to enter "0" and select "None" wherever required. Input all amounts as positive values. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Options % gain/loss Stock % gain/loss $40 $50 $60
Question 3?

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