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Suppose You Believe That Basso Inc

Question 23

Multiple Choice

Suppose you believe that Basso Inc.'s stock price is going to increase from its current level of $22.50 sometime during the next 5 months.For $3.10 you can buy a 5-month call option giving you the right to buy 1 share at a price of $25 per share.If you buy this option for $3.10 and Basso's stock price actually rises to $45,what would your pre-tax net profit be?


A) -$3.10
B) $16.90
C) $17.75
D) $22.50
E) $25.60

Correct Answer:

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