You Own One Call Option with an Exercise Price of $40

question 42

Multiple Choice

You own one call option with an exercise price of $40 on Northwest Exporters stock. This stock is currently selling for $37.90 a share but is expected to increase to either $38 or $43 a share over the next year. The risk-free rate of return is 4 percent and the inflation rate is 3.5 percent. What is the current value of your option if it expires in one year?

• A) $.41
• B) $.82
• C) $1.67
• D) $2.10
• E) $5.00

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Definitions:

Number Of Times

The frequency or occurrence rate of an event or action.

Number Of Places

Refers to the specified number of locations or positions within a given context or setting.

Removed View

An additional view in drafting that is separated from the main drawing to clarify details of the object being depicted.

Secondary Aux View

An auxiliary view derived from a primary auxiliary view in drafting for the purpose of showing a part's features more clearly.