Please show work for this problem Eric Wertz is considering the following altern
ID: 2743533 • Letter: P
Question
Please show work for this problem
Eric Wertz is considering the following alternatives for investing in Zee Industries which is now selling for $44 per share:
(1)
Buy 500 shares, and
Buy six month call options with an exercise price of 45 for $3.25 premium.
Assuming no commissions or taxes, what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?
a.
9.54% loss
b.
95.45% loss
c.
0.9545% gain
d.
95.45% gain
e.
9.54% gain
(1)
Buy 500 shares, and
Buy six month call options with an exercise price of 45 for $3.25 premium.
Assuming no commissions or taxes, what is the annualized percentage gain if the stock is at $30 in four months and the stock was purchased?
a.
9.54% loss
b.
95.45% loss
c.
0.9545% gain
d.
95.45% gain
e.
9.54% gain
Explanation / Answer
The answer is 95.45% loss. Lets see how it iss computed.
Explanation:
[(30 - 44) / 44] x 3 = 95.45% loss