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A Speculator Buys a Call Option for $3, with an Exercise

Question 3

Multiple Choice

A speculator buys a call option for $3, with an exercise price of $50. The stock is currently priced at $49, and rises to $55 on the expiration date. The speculator will exercise the option on the expiration date (if it is feasible to do so) . What is the speculator's profit per unit?


A) $1
B) $5
C) $2
D) -$1
E) -$2

Correct Answer:

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