Question
State Farm Insurance purchased a call option on an S&P 500stock index.The option premium was quoted as $7.00 and the exercise price is 1375.Assume the
State Farm Insurance purchased a call option on an S&P 500stock index.The option premium was quoted as $7.00 and the exercise price is 1375.Assume the index on the futures contract becomes 1387 and State Farm exercises the option at that value.What is State Farm's net gain or loss after accounting for the premium paid for the option?
-$4,750
-$5,000
$1,250
$1,000
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International Finance Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
10th edition
978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648
