A Call Option with a Strike of K = 100

question 14

Multiple Choice

A call option with a strike of K = 100 is purchased at a premium of $4.The stock price at maturity is $105.The net payoff of the option is

• A)$1
• B)$5
• C)$96
• D)$101

---

Definitions:

Optimal Bidding Strategy

A method or plan designed to win at an auction or in a competitive context, maximizing the chance of success while minimizing costs.

True Value

The actual, inherent worth of an asset, without distortion from market factors or perceptions.

Bid-rigging

A fraudulent scheme where businesses collude to control the bidding process, often at the expense of fairness.

Common Value Auctions

Auctions in which the item for sale has a value that is equally unknown to all bidders, but ultimately, the value is the same for everyone.