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Question
Pitchgent, Inc., stock is currently trading at $22 per share. There are two types of options available on the stock. Call options with a strike price of $16, which expire next month, are currently trading at $7.00. Put options with a strike price of $16 which expire next month are currently trading at $1.10. Larry invests $132 in common stock. Keaty invests $132 in the call options. Marek invests $132 in the put options. At the end of one month, the price of Pitchgent, Inc., is $25. Who made the most money off of their investment?A) Larry
B) Keaty
C) Marek
D) Larry and Keaty tied
Answer
This answer is hidden. It contains 456 characters.
Related questions
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The claim lenders' hold on cash flows in a company with outstanding risky debt is often thought of as:
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Q:
Bifive Homes, Inc., is a developer of planned residential communities. It has entered into an option contract with a land owner outside Austin, Texas. It will pay the land owner $100,000 for the option to buy the land in two years at a price of $20 million. During that time Bifive Homes will evaluate population and real estate trends in Austin. Its plan is to buy the land if real estate prices in Austin increase enough that developing the land would be worth more than the $20 million price. The $20 million purchase price resembles:
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Q:
When the value of the firm is above the face value of the debt:
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B) the premium of a call option on the plant.
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Q:
What happens to the value of call and put options if the volatility of the price of underlying asset decreases?
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Q:
Which of the following statements is true of a call option?
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Q:
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A) True
B) False
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If a firm adds financial options to its debt securities, it will increase the interest expense to the firm.
A) True
B) False
Q:
Consider a call option on a stock with a strike price of $60. If the stock price at expiration is $50, the payoff from the call option is $10.
A) True
B) False