Suppose the price of a share of IBM stock is $100.An April call option on IBM stock has a premium of $5 and an exercise price of $100.Ignoring commissions,the holder of the call option will earn a profit if the price of the share
A) increases to $104.
B) decreases to $90.
C) increases to $107.
D) decreases to $96.
E) none of these.

Question

Quizplus · Accepted Answer

The holder of the call option will earn a profit if the stock price exceeds the exercise price plus the premium paid. In this case, the exercise price is $100 and the premium is $5, so the stock price must exceed $105 for a profit. At $107, the holder earns a profit.

Suppose the Price of a Share of IBM Stock Is