Suppose IBM Is Priced at $225 a Share and a Call

question 76

Essay

Suppose IBM is priced at $225 a share and a call with an exercise price of $250 and two months to expiration costs $0.125 per contract. Why do you suppose investors would be willing to purchase a call so far out-of-the-money?

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Definitions:

Validity

The degree to which a tool, test, or instrument measures what it is intended to measure.

Head Size

A physical measurement of the circumference or volume of the human head, which may be studied in relation to brain size and cognitive abilities.

Intellectual Disability

A term for significant limitations in both intellectual functioning and in adaptive behavior, which covers many everyday social and practical skills, manifesting before the age of 18.

Chromosomal Abnormality

A change in the number or structure of chromosomes in cells, which can lead to developmental disorders or diseases.