Buyer Company bought 100 options of Target Co one year ago and would like to exercise them today. The options were purchased at $24 each, and they expire when trading ends today (assume there is no speculative premium left.)  Target common stock is selling today for $50 per share. The exercise price is $30 and each option entitles the holder to purchase two shares of stock, each at the exercise price.  If the options are exercised today, what would Buyer Company’s dollar profit or loss be?

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
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Buyer Company bought 100 options of Target Co one year ago and would like to exercise them today. The options were purchased at $24 each, and they expire when trading ends today (assume there is no speculative premium left.)  Target common stock is selling today for $50 per share. The exercise price is $30 and each option entitles the holder to purchase two shares of stock, each at the exercise price.  If the options are exercised today, what would Buyer Company’s dollar profit or loss be?  

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