If We Have a Stock Selling for $95

question 27

Multiple Choice

If we have a stock selling for $95.00 and a call option for this stock has a strike price of $82.00 and an option price of $13.60:

• A) the intrinsic value of the option is $0.60 and the time value of the option is $13.00.
• B) the intrinsic value is $82.00 and the time value of the option is $13.60.
• C) the intrinsic value of the option is $13.00 and the time value of the option is $0.60.
• D) the intrinsic value is $0 since the option is out of the money.

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Definitions:

LIFO

"Last In, First Out," a method of inventory valuation where the most recently produced or acquired items are the first to be expensed.

Average Cost

A method of inventory valuation which calculates the cost of goods sold and ending inventory based on the average cost of all similar items in inventory.

Ending Inventory

The total value of a company's merchandise, raw materials, and products left unsold at the end of an accounting period.