You Currently Own a One-Year Call Option on Way-One, Inc

question 106

Multiple Choice

You currently own a one-year call option on Way-One, Inc. stock. The current stock price is $26.50 and the risk-free rate of return is 4 percent. Your option has a strike price of $20 and you assume that it will finish in the money. What is the current value of your call option?

• A) $6.25
• B) $6.50
• C) $6.76
• D) $7.13
• E) $7.27

---

Definitions:

Cash

Cash is a medium of exchange that represents real value and is used for transactions, available either as physical currency or digital form.

Refuse

To decline to accept or allow something; to show unwillingness to do, accept, give, or allow something.

Special Type Of Draft

A particular form of negotiable instrument, such as a check or bill of exchange, with specific conditions or purposes.

Electronic Fund Transfer

A digital transaction that moves funds from one account to another without the use of cash or paper checks.