You Own One Call Option with an Exercise Price of $30

question 58

Multiple Choice

You own one call option with an exercise price of $30 on Nadia stock.This stock is currently selling for $27.80 a share but is expected to increase to either $28 or $34 a share over the next year.The risk-free rate of return is 5 percent.What is the current per share value of your option if it expires in one year?

• A)$.76
• B)$.79
• C)$.89
• D)$.92
• E)$.95

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Definitions:

Sensory

Relating to or involving the senses or sensation, including sight, sound, taste, touch, and smell.

Short-Term

Pertaining to a limited time period, often in reference to memory, indicating retention of information for a brief duration.

Long-Term

Pertaining to or involving an extended period, especially with reference to retention of information or memory.

Prospective

Relating to or effective in the future, often used in studies that follow subjects forward in time.