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Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call

ID: 2634692 • Letter: S

Question

Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a $50 strike and 90 days to maturity is quoted at $3.75. Compare the percentage gains and losses from a $18,750 investment in the stock versus the option in 90 days for stock prices of $40, $50, and $60.(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Leave no cells blank - be certain to enter "0" and select "None" wherever required. Input all amounts as positive values. Omit the "%" sign in your response.)

Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a $50 strike and 90 days to maturity is quoted at $3.75. Compare the percentage gains and losses from a $18,750 investment in the stock versus the option in 90 days for stock prices of $40, $50, and $60.(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Leave no cells blank - be certain to enter "0" and select "None" wherever required. Input all amounts as positive values. Omit the "%" sign in your response.)

Explanation / Answer

Price of Stock

50

Strike price

50

Premium of call option

3.75

Maturity

90 days

Total Investment

18750

No of option bought(Investment/ Premium)

5000

No of Stock Bought(Investment/ Stock price)

375

Options % Gain/Loss
=(5000*(Max(S-50,0)-3.75)/18750

Stock % Gain/Loss
=(375*(S-50)/18750)

$40

-100.00%

-20.000%

$50

-100.00%

0.000%

$60

166.67%

20.000%

Price of Stock

50

Strike price

50

Premium of call option

3.75

Maturity

90 days

Total Investment

18750

No of option bought(Investment/ Premium)

5000

No of Stock Bought(Investment/ Stock price)

375

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