Answer:
Full question is "A six-month call option contract on 100 shares of Home Depot common stock with a strike price of $60 can be purchased for $600. Assuming that the market price of Home Depot stock rises to $75 per share by the expiration date of the option, what is the call holder’s profit? What is the holding period return?"
1. Call holder's profit = Value at expiration - Purchase price
Call holder's profit = [[Underlying stock price-Strike price]*Number of shares] - Purchase price
Call holder's profit = [($75-$60)*100] - $600
Call holder's profit = $900
2. Holding period return = Value at expiration - Purchase price / Purchase price
Holding period return = [[Underlying stock price-Strike price]*Number of shares] Purchase price / Purchase price
Holding period return = [[Underlying stock price-Strike price]*Number of shares] Purchase price [($75-$60)*100] - $600 / $600
Holding period return = $900 / $600
Holding period return = 1.5
Holding period return = 150%