A 6-Month Call Option on ABC Stock Is Priced at $2.80

question 43

Multiple Choice

A 6-month call option on ABC stock is priced at $2.80. The call option delta is .66. How will the approximate call option price be computed if the underlying stock price increases by $1?

• A)$2.80
• B)$2.80 − $.66
• C)$2.80 + $.66
• D)$2.80 × .66
• E)$2.80 × (1 + .66)

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Definitions:

Low-Risk Securities

Investments that have a lower chance of loss or default, often characterized by more stable returns.

Historical Cost Principle

An accounting principle that states that assets should be recorded and reported at their original purchase cost.

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An account on the balance sheet that represents the cost of buying and holding shares of another company.

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Charges paid to a broker for executing transactions or providing specialized services.