When one buys a cash instrument, for example 100 shares of ABC Inc., the payoff is linear (disregarding the impact of dividends). If share are purchased at $50 and the price appreciated to $75, we have ________ on a mark-to-mark basis.
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A. B. C. D.A
Based on the information provided in the question, the scenario is that an investor has purchased 100 shares of ABC Inc. at a price of $50 per share. Subsequently, the price of the shares has appreciated to $75 per share.
To calculate the profit or loss in this scenario, we can use the following formula:
Profit or Loss = (Selling Price - Purchase Price) x Number of Shares
Using this formula, we can calculate the profit or loss on a mark-to-market basis as follows:
Profit or Loss = ($75 - $50) x 100 shares Profit or Loss = $25 x 100 shares Profit or Loss = $2500
Therefore, the answer is (C) Made $2500.
It is worth noting that the answer assumes that the investor has not sold the shares and is only calculating the profit or loss on a mark-to-market basis. If the investor were to sell the shares, the actual profit or loss would depend on the selling price. Additionally, as mentioned in the question, the impact of dividends has been disregarded, so the actual return may be different if dividends were included in the analysis.