An Investor Holds Long Call Options That May Be Exercised

question 72

Multiple Choice

An investor holds long call options that may be exercised at any time over the next month.The spot price of the underlying asset is $12.75; the strike price of the option is $15.10; and the premium paid was $2.35.What is the value of the option to the holder?

• A) -$2.35
• B) zero
• C) $10.40
• D) $15.10

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Definitions:

Initial Investment

The initial amount of money spent to start a project, purchase an asset, or invest in a business venture.

Accounting Equation

The foundational principle of accounting that states assets equal liabilities plus equity.

Accounts Payable

Liabilities representing amounts owed by a company to creditors for purchases of goods and services on credit.

Limited Liability Company (LLC)

A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners, yet treated as a partnership for tax purposes.