What Is the Current Value of a Six-Month Call Option

question 54

Multiple Choice

What is the current value of a six-month call option with an exercise price of $12? The
Six-month risk-free interest rate (periodic rate) is 5%. [Use the risk-neutral valuation method]

• A) $9.78
• B) $10.28
• C) $16.88
• D) $13.33

---

Definitions:

Imagery

The use of visually descriptive or figurative language in writing to create vivid pictures in the reader's mind or the use of visual representations in the mind through imagination.

Logical Sequence

The orderly and coherent structure and progression of ideas, events, or steps.

Management Decisions

Decisions made by individuals in managerial positions that affect the direction, operation, and success of an organization.

Peter Drucker

Peter Drucker was an Austrian-born American management consultant, educator, and author, whose ideas on management and business leadership profoundly influenced modern management practices.