You Currently Own a One-Year Call Option on Caspian Way

question 142

Multiple Choice

You currently own a one-year call option on Caspian Way stock. The current stock price is $38.70 and the risk-free rate of return is 3.85 percent. Your option has a strike price of $37.50 and you assume the option will finish in the money. What is the current value of your call option?

• A) $1.20
• B) $2.59
• C) $3.07
• D) $5.13
• E) $7.27

---

Definitions:

Joint Costs

Expenses that are incurred in the process of producing two or more products up to the point where the products are separately identifiable.

Budgeted Costs

Estimated expenses planning for future periods, which companies use for managing financial resources and controlling expenditures.

Responsibility Accounting

This accounting methodology focuses on collecting, summarizing, and reporting financial information related to the responsibilities of individual managers.

Performance Report

A document that compares budgeted to actual financial results to gauge the performance of a department, project, or company.