John and Randy Form a Company with Assets Worth $900

question 134

Multiple Choice

John and Randy form a company with assets worth $900. They each have four shares of stock. Randy gives Cheri a call option on one share of stock. The option has an exercise price of $100 and
Expires in one year. In one year, the firm's assets are worth $1,000 and Cheri exercises the option.
What is the intrinsic value of the option at maturity?

• A) $0
• B) $25
• C) $50
• D) $150
• E) $200

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