1. You purchase one IBM July 120 call contract (equaling 100 shares) for a premium of $5. You hold the option until the expiration date, when IBM stock sells for $123 per share. You will realize a ______ on the investment.
$200 profit
$200 loss
$300 profit
$300 loss
2. The stock price of Atlantis Corp. is $43 today. The risk-free rate of return is 10%, and Atlantis Corp. pays no dividends. A call option on Atlantis Corp. stock with an exercise price of $40 and an expiration date 6 months from now is worth $5 today. A put option on Atlantis Corp. stock with an exercise price of $40 and an expiration date 6 months from now should be worth __________
$.05
$.14
$2
$3.95