the correct answer is C
only Reynardo showed profit
because at the end of the year when stock price fall to 20
Berniss investment in stock will shows loss because of stock price fall from 24 to 20 and there will be a capital loss
jewel investment in call option will also show loss because the call option will be out-of-the- money and the call option will expire without being exercised (strike price greater than stock price on expiration date ) and there will be a loss equal to 144$
only Reynardo showed profit because the put option will be in-the- money so the put option will be exercised on expiration date (strike price greater than stock price on expiration date )
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Fadi Babbili
Chief Financial Officer
Beirut
Lebanon
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Original Message:
Sent: 12-12-2019 12:52 AM
From: Dileep Yeramaka
Subject: Answer the questio Section B- Part 2
Tunerecord Unit Co. stock was trading last year at $24. There were two types of options available on the stock. Call options with a strike price of $24, which expire at the end of the year, were trading at $9.60. Put options with a strike price of $24, which expire at the end of the year, were trading for $2.40. Berniss invested $144 in common stock. Jewel invested $144 in the call options. Reynardo invested $144 in the put options. At the end of one year the price of Tunerecord Unit stock is $20.00. How did their investments compare at the end of the year?
| A | All three investors showed a profit. |
| B | Only Jewel showed a profit. |
| C | Only Reynardo showed a profit. |
| D | Only Berniss showed a profit. |
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Dileep Yeramaka
Controller
Chennai
India
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