A Call Option Will Have the Highest Value When the Stock

question 37

Multiple Choice

A call option will have the highest value when the stock price is:

• A) far above the exercise price.
• B) closest to the exercise price.
• C) approaching zero.
• D) less than the exercise price.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating how much revenue is contributing to fixed costs and profit.

Automated Factory

A production facility that relies heavily on automated processes and machinery to manufacture goods with minimal human intervention.

Fixed Expenses

Costs that do not vary with the level of production or sales, such as rent, insurance, and salaries.

Variable Expenses

Expenses that change in proportion to the activity of a business, such as sales commissions that rise with increased sales or materials costs that rise with increased production.