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Determining the net pre-tax profit or loss

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Suppose you believe that Johnson Company's stock price is going to increase from its current level of $15.25 sometime during the next 5 months. For a total of $425 you can buy a 5-month call option giving you the right to buy 100 shares at a price of $20 per share. If you buy this option for $425 and Johnson's stock price in 5 months from now right before the maturity of this option is $21/share, would you exercise your call option and what would your net pre-tax profit or loss be?

Reference no: EM132951795

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