Chapter 02 · Section 2.1

Chrysler call

A July 50 Chrysler call was bought for a premium of $2.00. If the call is exercised when Chrysler stock is trading at $55.00, at what price may the holder purchase the underlying stock?

• a) $2.00
  No. The premium, or price of the option, is $2.00. This is the cost of acquiring the right to purchase 100 shares of Chrysler by July for $50 per share.
  b) $55.00
  c) $50.00
  d) $48.00

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