Calculate the Value of a Short Call If the Strike

question 46

Multiple Choice

Calculate the value of a short call if the strike price is $10.00,the premium is $1.50 and the spot price is $8.00,given V = P - max(S-X,0) .

• A) -$1.50
• B) -$0.50
• C) $0.50
• D) $1.50

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Definitions:

Residual Income

The income that exceeds the minimum required return on investment or capital; often used in performance measurement and evaluation.

Minimum Required Rate

The lowest return on investment that a company or individual deems acceptable, often used in financial analysis and capital budgeting.

Operating Assets

Operating assets are the assets a company uses in its daily operations to generate revenue, such as inventory, property, plant, and equipment.

Net Operating Income

Refers to the profit realized from a business's operations after subtracting all operating expenses, excluding taxes and interest.