Assume the Following American Call Option Will fiNish In-The-Money: the Exercise

question 27

Multiple Choice

Assume the following American call option will finish in-the-money: the exercise price is $75, maturity is one year, current stock price is $72.50, and the risk-free interest rate is 6%. What is the
Value of the call option?

• A) -$6.60
• B) $0.00
• C) $1.75
• D) $2.15
• E) $2.65

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Definitions:

Output

The cumulative sum of products and services generated by an economy.

Average Fixed Cost

The set expenses associated with production (not influenced by production scale) distributed over the number of items produced.

Marginal Cost

The increase in total production costs resulting from producing one additional unit of a product or service.

Variable Cost

Charges that adjust according to the volume of goods produced or services provided.