Refer to the previous question. What is Yvonne's profit/loss if Turtle's price after one year is €40?
A) €50 000
B) −€50 000
C) €100 000
D) −$100 000
E) None of the above

Question

Quizplus · Accepted Answer

If Turtle's price after one year is €40, Yvonne will have to purchase the stock for €30 and sell it for €40, resulting in a profit of €10 per share. Since Yvonne bought 5,000 shares, her total profit would be €50,000. However, since Yvonne paid a fee of €25,000 to the investment bank, her net profit would be €25,000. Therefore, Yvonne would incur a loss if Turtle's price drops to €20 and a profit of €25,000 if the price is €40. Option B is the only choice that reflects a possible loss if the price of Turtle drops to €20.

Refer to the Previous Question