You Own a Call Option on Pester Me Stock That

question 425

Multiple Choice

You own a call option on Pester Me stock that expires in one year. The exercise price is $22.50. The current price of the stock is $26.40 and the risk-free rate of return is 4 percent. Assume that the option will finish in the money. What is the value of the call option?

• A) -$4.77
• B) -$3.90
• C) $0
• D) $3.90
• E) $4.77

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