Final answer:
The investor makes a net economic gain of $150 from the stock/option portfolio after exercising the call option, which has an intrinsic value of $4 per share for 100 shares, minus the initial cost of the option purchase ($250).
Step-by-step explanation:
The investor's situation involves options trading, which is a part of financial markets and investment strategies. To calculate the net economic gain or loss of the investor's stock/option portfolio, we must consider the intrinsic value of the option contract at expiration and the initial cost of buying the option.
The call option allows the investor to buy 100 shares of World Port Management stock at a strike price of $50 when the stock is at $54 at expiration. This means that the option has an intrinsic value of $4 per share ($54 - $50 = $4), which for 100 shares totals to $400. However, the investor initially paid $250 for the option, so this cost must be subtracted from the profits made from exercising the option.
Therefore, the net economic gain is calculated as follows:
Gain from option exercise: 100 shares × ($54 - $50) = $400
Initial cost of option: -$250
Net economic gain: $400 - $250 = $150
In conclusion, the investor would experience a net economic gain of $150 on the entire stock/option portfolio.