Exhibit 20 -Refer to Exhibit 20

question 97

Multiple Choice

Exhibit 20.7
Use the Information Below for the Following Problem(S)
The current stock price of Zanco Corporation is $50. Zanco Corporation has the following put and call option prices with exercise prices at $45 and $50.
$$\begin{array} { c c c } \text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \\\$ 45 & \$ 1.50 & \$ 6.75 \\\$ 50 & \$ 3.75 & \$ 4.25\end{array}$$
-Refer to Exhibit 20.7.The intrinsic value for the call option with a $45 exercise price is

• A) $0.00
• B) $1.50
• C) $5.00
• D) $5.25
• E) $6.75

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Definitions:

Direct Costs

Expenses that can be directly tied to the production of specific goods or services, such as raw materials and labor.

Amortization

The gradual reduction of a debt or the spreading out of capital expenses for intangible assets over a specific period of time, often through regular payments.

Flotation Costs

The expenses incurred by a company in issuing new securities, including fees for underwriters, legal counsel, and registration.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the percentage of tax applied to your income for each tax bracket in which you qualify.