# Investments.

May 31st, 2016
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1. A three-month call option is the right to buy stock at \$20. Currently the stock is selling for \$22 and the call is selling for \$5. You are considering buying 100 shares of the stock (\$2,200) or one call option (\$500).

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Investments1JKInstructor Charles BensonInvestmentsDecember 20, 2015InvestmentsInvestments21. A three-month call option is the right to buy stock at \$20. Currently the stock is sellingfor \$22 and the call is selling for \$5. You are considering buying 100 shares of the stock(\$2,200) or one call option (\$500).a) If the price of the stock rises to \$29 within three months, what would be the profits orlosses on each position? What would be the percentage gains or losses?\$400 for the option, \$700 for the stock, 80% for the option, 31.8% for the stock.b) If the price of the stock declines to \$18 within three months, what would be the profitsor losses on each position? What would be the percentage gains or losses?-\$500 option, -\$400 stock, -100% option, -18% stock.c) If the price of the stock remained stable at \$22, what would be the percentage gains orlosses at the expiration of the call option?-\$300 option, 0 stock.d) If you compare purchasing the stock to purchasing the call, why do the percentagegains and losses differ?4. The price of a stock is \$51. You can buy a six-month call at \$50 for \$5 or a six-month putat \$50 for \$2.a) What is the intrinsic value of the call?\$1 - using the call option you can purchase 100 shares at \$50 per share ( the strike price ) and sellthem at the market price of \$51 a share thereby netting an intrinsic value of \$1 per share.b) What is the intrinsic value of the put?Investments3\$0 - the put option guarantees yo

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