A 6-Month Call Has a Strike Price of $30

question 18

Multiple Choice

A 6-month call has a strike price of $30. The underlying stock is priced at $32.80 and the option premium on the call is $3.40. What is the per share time value of the call?

• A) $0.00
• B) $0.60
• C) $1.40
• D) $2.80
• E) $3.60

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Definitions:

Erosion Cost

Costs incurred from the gradual loss or diminishing in value of an asset over time.

Mid-range Camper

A type of recreational vehicle or accommodation designed with features and amenities that strike a balance between affordability and comfort, catering to a wide range of consumers.

Class A

A classification of common or preferred shares that typically comes with more voting rights or other benefits compared to other classes.

Initial Cost

The upfront expenditure involved in the purchase of an asset or the start-up of a project, excluding ongoing operational costs.