A 4-Month Call Has a Strike Price of $20

question 75

Multiple Choice

A 4-month call has a strike price of $20.The current underlying stock price is $21.45.What is the intrinsic value of this call?

• A) $0.00
• B) $0.48
• C) $1.45
• D) $3.90
• E) $4.35

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Definitions:

Note Payable

A written promise to pay a certain amount of money, often with interest, by a specific date, recognized as a liability in the borrower's financial statements.

Consolidated Statement

A financial statement that aggregates the financial position and results of operations of a parent company and its subsidiaries as a single entity.

Push-down Accounting

An accounting method used in situations of acquisitions, where the financial statements of the acquired company are restated to reflect the acquirer's basis of assets and liabilities.

Equity Method

An accounting technique used by firms to assess the profits earned from their investments in other companies, where they own a significant but not controlling interest, typically recognized as 20% to 50% ownership.