Assume the Following American Call Option Will Finish In-The-Money: the Exercise

question 309

Multiple Choice

Assume the following American call option will finish in-the-money: the exercise price is $75, maturity is one year, current stock price is $72.50, and the risk-free interest rate is 6%. What is the value of the call option?

• A) -$6.60
• B) $0.00
• C) $1.75
• D) $2.15
• E) $2.65

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Definitions:

Production Budget

A financial plan that outlines the expected production levels of a company based on projected sales, inventory policies, and capacity constraints.

Cash Collections

The total amount of money received from customers or clients for goods or services provided.

Sales Estimate

A projection of the revenue a company expects to generate from sales over a specific period, often used as a basis for budgeting and planning.

Preparation Sequencing

The organized planning and arrangement of tasks or activities to achieve a desired goal or outcome.