A Stock with a Current Price of $32 Will Either

question 53

Multiple Choice

A stock with a current price of $32 will either move up to $40.00 or down to $30 over the next period.The risk-free rate of interest is 3 percent.What is the value of a call option with a strike price of $35?

• A) $1.30
• B) $1.44
• C) $1.87
• D) $2.09
• E) $2.41

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Definitions:

Income Tax Expense

The total amount of income tax that a company reports as an expense in its financial statements for a specific period.

Pretax Income

The total earnings of a company before taxes have been deducted, also known as earnings before tax (EBT).

LIFO Method

"Last In, First Out" method; an inventory strategy where the most recently produced items are sold first, leaving older inventory in stock.

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First-In, First-Out."