If a Call Is in the Money on the Expiration

question 374

Multiple Choice

If a call is in the money on the expiration date then:

• A) The strike price must exceed the stock price.
• B) The value of the call is equal to the stock value plus the present value of the exercise price.
• C) The intrinsic value of the call is positive.
• D) The risk-free rate of return has declined since the call was written.
• E) The call must be a European rather than an American call.

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Definitions:

Import Quotas

Government-imposed limits on the volume of specific goods that can be imported, aimed at protecting domestic producers by controlling market supply.

Globalization

The integration of national economies into a worldwide economy.

American Consumer

An individual in the United States who purchases goods and services for personal use.

Frederic Bastiat

A 19th-century French economist and writer known for his advocacy of free trade and his witty criticisms of protectionism and socialism.