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Question

Bill purchased a call option on 100 shares of stock with a strike price of $43 for $2 per share. If Bill exercises the option when the market price reaches $48, what percent return did Bill receive on her investment? What is the greatest loss that Bill could have experienced on her investment?

Submitted: 25 days and 22 hours ago.
Category: Finance
Value: $9
Status: CLOSED

Accepted Answer

 

If Bill exercises the option when the market price reaches $48, what percent return did Bill receive on her investment?

 

=Market Price - (Strike Price + Call price) / Call Price

=48 - (43 + 2) / 2

= 3 / 2

= 150 percent

 

What is the greatest loss that Bill could have experienced on her investment?

 

Call Price X No. of Shares

2 X 100

= $ 200 maximum loss

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Expert: Falak Naz
Pos. Feedback: 100.0 %
Accepts: 
Answered: 10/28/2009

Accountant

I am a qualified Chartered Accountant. Currently i am working in financial institution.

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