Consider This Graph of a Call Option

question 79

Multiple Choice

Consider this graph of a call option.The option is a three-month American call option on €62,500 with a strike price of $1.50 = €1.00 and an option premium of $3,125.What are the values of A,B,and C,respectively?

• A)A = $3,125 (or $.05 depending on your scale); B = $1.50; C = $1.55
• B)A = €3,750 (or €.06 depending on your scale); B = $1.50; C = $1.55
• C)A = $.05; B = $1.55; C = $1.60
• D)none of the options

---

Definitions:

Economic Cost

The total cost of choosing one action over another, including both explicit and implicit costs.

Market Rate of Interest

The prevailing interest rate available in the marketplace on loans, determined by the supply of and demand for funds.

Anti-Employment Discrimination Legislation

Laws designed to prevent unfair treatment of workers based on personal characteristics, such as the Civil Rights Act in the United States.