Today, you are buying a one-year call on one share of Hi-Lo stock with a strike price of $40 along with a one-year risk-free asset that pays 4.5 percent interest. The cost of the call is $1.10 and the amount invested in the risk-free asset is $38.28. How much profit will you earn if the stock price is $38 a share at the end of the year?
A) -$1.38
B) -$.69
C) $0
D) $.62
E) $1.24

Question

Quizplus · Accepted Answer

The Answer of Today, you are buying a one-year call on one share of Hi-Lo stock with a strike price of $40 along with a one-year risk-free asset that pays 4.5 percent interest. The cost of the call is $1.10 and the amount invested in the risk-free asset is $38.28. How much profit will you earn if the stock price is $38 a share at the end of the year?
A) -$1.38
B) -$.69
C) $0
D) $.62
E) $1.24

Today, You Are Buying a One-Year Call on One Share