If a Microsoft January 20 Call Option with a Strike

question 104

Multiple Choice

If a Microsoft January 20 call option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $25.62,the price of the call option would have to be __________ to eliminate arbitrage opportunities.

• A)$5.00
• B)$10.00
• C)$15.00
• D)$25.00
• E)none of the above.

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Definitions:

Bond Issue

The method through which a corporation or governmental entity generates capital by issuing bonds to investors.

Selling Price

The amount of money a buyer pays to acquire a product or service from a seller.

Effective Interest Method

A method of calculating the amortized cost of a bond and of allocating interest income over the bond's life, reflecting the constant rate of interest over the period.

Bond Discounts

The divergence between the stated value of a bond and its decreased sale price.