Which of the Following Will Produce the Highest Call Price

question 55

Multiple Choice

Which of the following will produce the highest call price, all else constant? Assume that the options are all in-the-money.

• A) $20 exercise price; 45 days to option expiration.
• B) $25 exercise price; 45 days to option expiration.
• C) $20 exercise price; 60 days to option expiration.
• D) $25 exercise price; 60 days to option expiration.
• E) Insufficient information to answer this question.

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Definitions:

Market Rate

The interest rate available to most borrowers in the financial market, applied to loans or savings products.

Expected Profit

The forecasted or anticipated earnings from an investment or business activity, considering potential risks and returns.

Current Cost

The price that would be paid for goods or services if purchased in the current market, as opposed to historical cost.

User Cost

The cost of using a durable good or asset, which includes depreciation, interest lost on funds used to buy the asset, and maintenance costs.