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PolarNik [594]
3 years ago
11

Suppose you believe that basso inc.'s stock price is going to increase from its current level of $22.50 sometime during the next

5 months. for $3.10 you can buy a 5-month call option giving you the right to buy 1 share at a price of $25 per share. if you buy this option for $3.10 and basso's stock price actually rises to $45, what would your pre-tax net profit be?
Business
1 answer:
JulijaS [17]3 years ago
6 0

The pre-tax net profit can be calculated using the formula:

Net Profit = Final Stock Price – Buying Cost – Option Cost

Substituting the given values into the equation will result in:

Net Profit = $45 - $25 - $3.10

<span>Net Profit = $16.90</span>

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