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Suppose you believe that Johnson Company's stock price is going to increase from its current level of $16 sometime during the next 5 months. For
Suppose you believe that Johnson Company's stock price is going to increase from its current level of $16 sometime during the next 5 months. For a total of $625 you can buy a 10-month call option giving you the right to buy 100 shares at a price of $21 per share. If you buy this option for $625 and Johnson's stock price in 10 months from now right before the maturity of this option is $22/share, would you exercise your call option and what would your net pre-tax profit or loss be? (4 points)
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