Suppose you purchase a call option for $5 and an exercise price of $40. On the expiration day, the price of the share is $55. What is the return on the call option if you hold your position until maturity?
A)200%
B)300%
C)275%
D)125%

Question

Quizplus · Accepted Answer

The return on the call option is calculated as (Selling price - Purchase price) / Purchase price * 100. In this case, the selling price is $55 (the price of the share on the expiration day), and the purchase price is $5. Therefore, the return on the call option is (55 - 5) / 5 * 100 = 200%.

Suppose You Purchase a Call Option for $5 and an Exercise