The Current Market Price of a Share of Coca Cola

question 55

Multiple Choice

The current market price of a share of Coca Cola stock is $50. If a call option on this stock has a strike price of $45, the call

• A) is out of the money.
• B) is in the money.
• C) sells for a higher price than if the market price of Coca Cola stock is $40.
• D) is out of the money and sells for a higher price than if the market price of Coca Cola stock is $40.
• E) is in the money and sells for a higher price than if the market price of Coca Cola stock is $40.

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Definitions:

IRRs

The Internal Rate of Return is the discount rate at which the net present value of all cash flows from a specific project is zero.

NPV

Net Present Value, a calculation used to determine the present value of a series of future cash flows by discounting them at a specific rate.

Cash Flows

The total amount of money being transferred into and out of a business, particularly concerning its operating, investing, and financing activities.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.