Suppose the price of a share of IBM stock is $200. An April call option on IBM stock has a premium of $5 and an exercise price of $200. Ignoring commissions, the holder of the call option will earn a profit if the price of the share
A) increases to $204.
B) decreases to $190.
C) increases to $206.
D) decreases to $196.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

$200 + $5 = $205 (breakeven). The price of the stock must increase to above $205 for the option holder to earn a profit.

Suppose the Price of a Share of IBM Stock Is