You Own a Call Option on Beaker Glass Stock That

question 35

Multiple Choice

You own a call option on Beaker Glass stock that expires in one year. The exercise price is $35. The current price of the stock is $38.20 and the risk-free rate of return is 4.7 percent. Assume the option will finish in the money. What is the current value of the call option?

• A) $0
• B) $1.49
• C) $3.97
• D) $4.77
• E) $5.46

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Definitions:

Total Assets

The aggregate of all assets owned by a business, evaluated at cost or market value on the balance sheet.

Adjusted Trial Balance

A list of all accounts and their balances after adjusting entries have been made, used to prepare financial statements.

Prepaid Insurance

An asset account that represents insurance premiums paid in advance, which are expensed over the period the insurance coverage relates to.

Current Asset

Asset expected to be converted into cash, sold, or consumed within a year or within the business's operating cycle.