An American-Style Call Option with Six Months to Maturity Has

question 25

Multiple Choice

An American-style call option with six months to maturity has a strike price of $42. The underlying stock now sells for $50. The call premium is $14. What is the time value of the call?

• A) $8
• B) $12
• C) $6
• D) $4
• E) Cannot be determined without more information

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Definitions:

Direct Expenses

Costs that can be directly attributed to the production of specific goods or services.

Building Cost

The total expenses involved in constructing a building, including material, labor, and other direct and indirect costs.

Allocated

The process of assigning or distributing resources or expenses to various accounts or periods.

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A unit of area measurement equivalent to a square measuring one foot on each side, commonly used in measuring real estate and building spaces.