An American-Style Call Option with Six Months to Maturity Has

question 89

Multiple Choice

An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $44. The call premium is $14. What is the intrinsic value of the call?

• A) $14
• B) $9
• C) $0
• D) $23

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Definitions:

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenses to the period in which they actually occurred.

Income Summary

Income summary is an account where revenues and expenses are accumulated to calculate net income or loss for a specific period before transferring to the capital account.

Temporary Account

An account used to accumulate transaction information during a single accounting period, which is then transferred to permanent accounts.

Withdrawals

Amounts of money taken out from a business by the owner(s) for personal use, not considered a business expense.