If We Have a Stock Selling for $95

question 37

Multiple Choice

If we have a stock selling for $95.00 and a call option for this stock has a strike price of $82.00 and an option price of $13.60:

• A)The intrinsic value of the option is $0.60 and the time value of the option is $13.00.
• B)The intrinsic value is $82.00 and the time value of the option is $13.60.
• C)The intrinsic value of the option is $13.00 and the time value of the option is $0.60.
• D)The intrinsic value is $0 since the option is out of the money.

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Definitions:

Utility Functions

Representations of the satisfaction or pleasure consumers derive from consuming various goods or services.

S-Shaped

Describes a curve or function that depicts an initial slow growth, followed by rapid acceleration, and then a plateau or leveling off, commonly found in logistic growth models.

Convex

A shape or function that curves outward or has a bulge, often used in economics and mathematics to describe certain types of optimization problems or preferences.

Confidence Index

A measure, often used in financial contexts, reflecting the confidence or optimism that investors have in the financial markets or in the economy as a whole.