You Currently Own a One-Year Call Option on Rail Company

question 47

Multiple Choice

You currently own a one-year call option on Rail Company, Inc., stock. The current stock price is $51.80 and the risk-free rate of return is 4.25 percent. Your option has a strike price of $50 and you assume the option will finish in the money. What is the current value of your call option?

• A)$1.20
• B)$2.59
• C)$3.84
• D)$5.13
• E)$7.27

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Definitions:

Connective

In logic, a symbol or word used to connect two or more sentences in a compound sentence or to connect two or more propositions in a complex proposition.

Component

An individual part or element that combines with other parts to form a larger item, system, or machinery.

Symbolic Form

The representation of concepts, principles, or entities using symbols or symbolic expressions, often found in logical and mathematical contexts.

Truth Table

A tabular representation used in logic to determine the truth value of a proposition based on the truth values of its components.