A Call Option Whose Exercise Price Is Less Than the Spot

question 65

Multiple Choice

A call option whose exercise price is less than the spot price is said to be:

• A) in-the-money.
• B) at-the-money.
• C) out-of-the-money.
• D) under-the-spot.

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Definitions:

Acquisition Cost

The total cost incurred to acquire an asset, including the purchase price and related expenses.

Interest Costs

The amount paid for borrowing money, or the expense incurred from borrowing funds, typically expressed as an annual percentage.

Depletion Expense

An accounting and taxation method that allocates the cost of extracting natural resources, such as timber, minerals, and oil from the earth, over their extraction period.

Operating Expense

Ongoing costs for running a product, business, or system, excluding costs directly associated with producing goods or services.