FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com | Page 12

• Question 2
Cazden Motors' stock is trading at $30 a share. Call options on
the company's stock are also available, some with a strike price of $25
and some with a strike price of $35. Both options expire in three months.
Which of the following best describes the value of these
options?
• Question 3
Which of the following statements is CORRECT?
• Question 4
Suppose you believe that Florio Company's stock price is going
to decline from its current level of $82.50 sometime during the next 5
months. For $5.10 you could buy a 5-month put option giving you the
right to sell 1 share at a price of $85 per share. If you bought this option
for $5.10 and Florio's stock price actually dropped to $60, what would
your pre-tax net profit be?