When one buys a cash instrument, for example 100 shares of ABC Inc., the payoff is linear (disregarding the impact of dividends). If share are purchased at $50 and the price appreciated to $75, we have ________ on a mark-to-mark basis.

Question

Quizplus · Accepted Answer

When we buy shares at $50 and the price appreciated to $75, the profit is $25 per share. As we bought 100 shares, the profit will be $25 x 100 = $2500. Therefore, we made $2500 on a mark-to-mark basis.

When One Buys a Cash Instrument, for Example 100 Shares