You Notice That You Can Purchase an Option for $5

question 53

Multiple Choice

You notice that you can purchase an option for $5.The price of the underlying stock is currently $42.What is the option premium for this option?

• A) $5
• B) $37
• C) $42
• D) $47

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Definitions:

Expiration Date

The specified date on which an option, futures contract, or other derivative ceases to exist.

Right to Buy

An option giving the holder the ability to purchase an asset at a predetermined price within a specified timeframe.

Employee Stock Options

A benefit offered by companies to their employees, giving them the right but not the obligation to buy the company's stock at a predetermined price during a specified period.

Intrinsic Value

The inherent, actual value of an asset, independent of its market value.