Answer to Question #1422 in Finance for shelly

Question

1. An investor writes a covered call on a $40 stock with an exercise price of $50 for a premium of $2.
The investor’s maximum gain will be _____ and maximum loss will be ______.
2. Consider a European call option on Coca-Cola with exercise price equal to zero that expires in one
month. Assume Coca-Cola pays NO dividends in the next month. The maximum amount that you
would be willing to pay for that option today is ____.