If the Owner of a Call Option with a Strike

question 82

Multiple Choice

If the owner of a call option with a strike price of $35 finds the stock to be trading for $42 at expiration, then the option:

• A) expires worthless.
• B) will not be exercised.
• C) is worth $7 per share.
• D)cost too much initially.

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Definitions:

Rights Offering

A corporate action where a company offers existing shareholders the right to buy additional shares at a discount before offering them to the public.

Stock Outstanding

The total number of shares of a corporation that have been issued and are currently owned by investors, including public shareholders and company insiders.

Subscription Price

The price at which existing shareholders can purchase new shares before they are offered to the public, often during a rights issue.