Assume That a Stock Is Selling for $47 with Options

question 10

Essay

Assume that a stock is selling for $47 with options available at 20, 30, and 40 strike prices. The 40 call option is at 7 1/2. Calculate the following:
(a) The intrinsic value of the $40 call
(b) Is the call in-the-money?
(c) The speculative premium on the 40 call option
(d) The percent the speculative premium represents of the common stock price

---

Definitions:

Humanistic Perspective

The theory contending that people have a natural capacity to make decisions about their lives and control their behavior.

Rational Decisions

Choices made based on logical reasoning and objective analysis rather than emotion or personal preference.

Random Assignment

A procedure in experimental design that allocates participants randomly to either the control or experimental group, ensuring that each participant has an equal chance of being assigned to any group.

Experimental Research

Research designed to discover causal relationships between various factors.