The Common Stock of Hazelton Refiners Is Selling for $72

question 53

Multiple Choice

The common stock of Hazelton Refiners is selling for $72.30 a share.U.S.Treasury bills are currently yielding 4.8 percent.What is the current value of a one-year call option on this stock if the exercise price is $70 and you assume the option will finish in the money?

• A)$0
• B)$1.20
• C)$3.00
• D)$4.20
• E)$5.51

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Definitions:

Assets

Economic resources owned or controlled by a business or individual that are expected to provide future benefits.

Liabilities

Financial obligations or debts owed by a business to external parties or entities.

Retained Earnings

The portion of net earnings kept by the company instead of being paid out to its shareholders in the form of dividends.

Equity

The value of ownership interest in a firm, calculated as the difference between assets and liabilities on a company’s balance sheet.