Use the Table for the Question(s) Below

question 14

Multiple Choice

Use the table for the question(s) below.

-If the risk-free interest rate is 10%,then the NPV for "eenie" is closest to:

• A) -3.64
• B) 2.73
• C) 3.18
• D) 3.64

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Definitions:

Strike Price

The price at which the holder of an option contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset or security.

Option Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in case of a put option) the underlying asset.

Put Option Contracts

A financial instrument that gives the holder the right, but not the obligation, to sell a specified amount of an underlying security at a predetermined price within a specified time frame.

Exercise Price

The specified price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.