Question

22. You have written one July 123 call contract on XRI stock for a premium of $9. You hold the option until the expiration date, when XIR stock sells for $127 per share. You will realize a ______ on the investment.

Multiple Choice

A $500 profit

B $1,300 loss

C $400 loss

D $400 profit

23. The spot price for S&P100 is $1,700. The dividend yield on the S&P 100 is 4.8%. The risk-free interest rate is 5.8%. The futures price for S&P100 for a 6-month contract on gold should be __________.

Multiple Choice

A $1,655.74

B $1,704.79

C $1,719.83

D $1,708.48

Answer 1

The profit is computed as shown below:

= (strike price - price at expiration + premium received) x 100

= ($ 123 - $ 127 + $ 9) x 100

= $ 500 Profit

So, the correct answer is option A.

The price is computed as shown below:

= Spot price x (1 + risk free rate - dividend yield) ^{6 / 12}

= $ 1,700 x (1 + 0.058 - 0.048) ^0.50

= $ 1,708.48 Approximately

So, the correct answer is option D.

Feel free to ask in case of any query relating to this question