Braddock Construction Co.\'s stock is trading at $20 a share. Call options that

Question

   Braddock Construction Co.'s stock is trading at $20 a share. Call options that expire in three months with a strike price of $20 sell for $1.50. Which of the following will occur if the stock price increases 10%, to $22 a share?

a.     The price of the call option will increase by more than $2.

b.    The price of the call option will increase by less than $2, and the percentage increase in price will be less than 10%.

c.     The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10%.

d.    The price of the call option will increase by more than $2, but the percentage increase in price will be less than 10%.

e.     The price of the call option will increase by $2.

Explanation / Answer

a.            The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10%.

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.