Currently, T-Bills Yield 3

question 52

Multiple Choice

Currently, T-bills yield 3.8 percent and MTM stock sells for $38 a share. There is no possibility that the stock will be worth less than $36 per share in one year. What is the value of a call option on this stock if the exercise price is $35 per share?

• A) $.32
• B) $3.45
• C) $2.89
• D) $4.28
• E) $.96

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Definitions:

Federal Budget Deficit

The financial situation where the federal government's expenditures exceed its revenues within a given fiscal year.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Budget Deficit

The financial situation where a government's expenditures exceed its revenues within a specific period, leading to borrowing or debt accumulation.

Tax Revenues

Represents the income that is gained by governments through taxation.