Given the Following Data: Stock Price = $50; Exercise Price

question 22

Multiple Choice

Given the following data: Stock price = $50; Exercise price = $45; Risk-free rate = 6%; variance = 0.2 ; Expiration = 3 months. Calculate value of a European call option: [Use Black-Scholes Formula]

• A) $7.62
• B) $7.90
• C) $5.00
• D) none of the above

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Definitions:

Absorption Costing

A method of inventory costing that includes all manufacturing costs, both variable and fixed, in the cost of a product.

Production Costs

The total expenses incurred in the manufacturing or production of goods, including materials, labor, and overhead.

Sold Goods Awaiting Shipment Inventory

Goods that have been sold but are still in the inventory because they have not yet been shipped to the buyer.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is used globally for the preparation of public company financial statements.