Suppose you purchase a call option for $5 and a strike price of $40.On the expiration day,the price of the stock is $55.What is the return on the call option if you hold your position until maturity?
A)125%
B)200%
C)275%
D)300%
E)-100%

Question

Quizplus · Accepted Answer

The return on the call option is calculated by taking the profit from the option and dividing it by the initial cost of the option. The profit is the difference between the stock price at expiration ($55) and the strike price ($40), which is $15, minus the cost of the option ($5), resulting in a profit of $10. Dividing this by the initial cost of the option ($5) and multiplying by 100 gives a return of 200%.

Suppose You Purchase a Call Option for $5 and a Strike