You purchase 10 call option contracts with a strike price of $60 and a premium o
ID: 2729059 • Letter: Y
Question
You purchase 10 call option contracts with a strike price of $60 and a premium of $1.95. Assume the stock price at expiration is $72.00.
What is your dollar profit? (Do not round intermediate calculations. Omit the "$" sign in your response.)
What if the stock price is $57.95? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Omit the "$" sign in your response.)
1.What is your dollar profit? (Do not round intermediate calculations. Omit the "$" sign in your response.)
Explanation / Answer
Answer:1 Cost of contracts = $1.95 × 10 × 100 = $1,950
If the stock price is $72.00, the value is: ($72.00 - 60) × 10 × 100 = $12,000
Dollar return = $12,000 - 1,950 = $10,050
Answer:2 If the stock price is $57.95, the call is worthless, so the dollar return is $-1,950.
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