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Corporate Finance · End Term · 22 Dec 2024 · September 2024 term · Set QDB1

Question 25: You purchase a one-year call option with a strike price …

Question 25

+3 marksOne correct option

You purchase a one-year call option with a strike price of Rs 50 and two one-year put options with a strike price of Rs 50. The call premium is Rs 4, and the put premium is Rs 2. The current share price is Rs 45. If one year later, the share price increases to Rs 60

  1. A

    You make a profit of Rs 12.

  2. B

    You make a profit of Rs 10.

  3. C

    You make a profit of Rs 2.

  4. D

    You incur a loss of Rs 2.

Show answer

Correct answer

  • C

    You make a profit of Rs 2.

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Question 25 of 35 in the IIT Madras BS Corporate Finance (Corporate Finance) End Term paper sat on 22 Dec 2024, in the September 2024 term (IIT M DEGREE AN EXAM QDB3 22 Dec 2024). It carries 3 marks.

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