Multiple Choice
Warnes Motors' stock is trading at $20 a share. Call options that expire in three months with an exercise price of $20 have a price of $1.50. Which of the following will occur if the stock price increases 10 percent to $22 a share?
A) The price of the call option will increase by $2.
B) The price of the call option will increase by more than $2.
C) The price of the call option will increase by less than $2, and the percentage increase in price will be less than 10 percent.
D) The price of the call option will increase by less than $2, but the percentage increase in price will be more than 10 percent.
E) The price of the call option will increase by more than $2, but the percentage increase in price will be less than 10 percent.
Correct Answer:
Verified
Correct Answer:
Verified
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