USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup

-Refer to Exhibit 16.4. Calculate the net value of a covered call position at a stock price at expiration of $20 and a stock price at expiration of $45.
A) $6.35, $18.85
B) $29.65, $42.15
C) $21.65, $34.15
D) $8, $8
E) -$8, -$8

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup
 
-Refer to Exhibit 16.4. Calculate the net value of a covered call position at a stock price at expiration of $20 and a stock price at expiration of $45.
A) $6.35, $18.85 
B) $29.65, $42.15 
C) $21.65, $34.15 
D) $8, $8 
E) -$8, -$8

Quizplus · Accepted Answer

Net value of covered call position = (Price of stock at expiration) - (Cost of stock - Call premium received)
At a stock price of $20: 
Net value = ($20) - ($19.60 - $0.15) = $0.55
At a stock price of $45: 
Net value = ($45) - ($19.60 - $0.15) = $25.55 
Therefore, the best choice is C, which has the closest net values of $21.65 and $34.15 to the calculated values of $0.55 and $25.55, respectively.