27. You purchase one IBM March 160 put contract for a put premium of $13. The ma

Question

27. You purchase one IBM March 160 put contract for a put premium of $13. The maximum profit that you could gain from this strategy is _________.

a. $1,300     b. $16,000 c. $160   d. $14,700

34. You write one IBM July 138 call contract for a premium of $15. You hold the option until the expiration date, when IBM stock sells for $148 per share. You will realize a ______ on the investment.

a. $1,000 profit    b. $1,000 loss   c. $2,500 loss    d. $500 profit

35. A loan for a new car costs the borrower .8% per month. What is the EAR?

a. 9.6%    b. 6.87% c. .80%    d. 10.03%

Explanation / Answer

Question 27:

Cost of strategy = size of the contract x price per option

                                = 100 x 13

                                = 1300

Total gain = size of the contract x price – cost of strategy

                    = 16,000 -1,300

                    = 14,300

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