You Own One Call Option with an Exercise Price of $30

question 167

Multiple Choice

You own one call option with an exercise price of $30 on Nadia Interiors stock. This stock is currently selling for $27.80 a share but is expected to increase to either $28 or $34 a share over the next year. The risk-free rate of return is 5 percent and the inflation rate is 3 percent. What is the current value of your option if it expires in one year?

• A) $.76
• B) $.79
• C) $.89
• D) $.92
• E) $.95

---

Definitions:

More Developed Nations

Countries with highly advanced economies and technological infrastructure, often characterized by higher average incomes and standards of living.

Local Cultures

The distinct ways of life, traditions, customs, and social practices found within specific geographic areas, communities, or social groups.

Radio

A form of media that transmits audio content to the public through electromagnetic waves, allowing for live entertainment, news, and information to be shared.

Tax Benefits

Tax benefits refer to deductions, exclusions, or credits that reduce the amount of taxes owed to the government.