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Suppose you purchase a call option to buy IBM common stock at $35 per share in September. The current price of IBM is 37 and the option premium is 4. What is the intrinsic value of the option? As the expiration date on the option approaches, what will happen to the size of the option premium?
Cost Change
Any variation, either an increase or decrease, in the total costs associated with production or operations.
Mixed Costs
Expenses that contain both fixed and variable components, changing in total with the level of activity.
Contribution Margin
The amount left from sales revenue after variable costs are subtracted, contributing to covering fixed costs and generating profit.
Merchandising Company
Businesses that buy finished goods and sell them at a profit without modifying the product, focusing on distribution rather than production.
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