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April 25th, 2013, 05:18 PM  #1 
Newbie Joined: Apr 2013 Posts: 1 Thanks: 0  European call option
Suppose that you purchase for 4 dollars a European call option with a strike price of 50 dollars. If the stock price on the exercise date is 38 dollars, what is your profit? Assume the riskfree interest rate is r=0. Please guide me through on how to solve this problem. It seems pretty simple but I think I am missing something. What I did: So = $4 and K = $50 so Vo = $4$50 = $46. S1 = $38 so V1 = $38  $50 = $12 Profit = $12 + $46 = $34 (which is the wrong answer) 
September 9th, 2013, 06:59 AM  #2 
Newbie Joined: Sep 2013 Posts: 9 Thanks: 0  Re: European call option
Actually it is quit simple: Your investment is USD 4. On Expiration your call is worthless(=max(0,3850)=0) So you lose USD 4 

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call, european, option 
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