You Have Written a Call Option on 1 Share of a Stock

question 44

Multiple Choice

You have written a call option on 1 share of A stock that is currently worth $30.You expect the price of the stock to either move to $40 or $20 over the next year.If the one-year risk-free interest rate is 5% and the strike price on the option is $25,what should have been the proceeds of the option?

• A) $15.72
• B) $8.22
• C) $.72
• D) $0

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Definitions:

Defective Goods

Products that are not as promised or are hazardous due to manufacturing or design flaws.

Recover Value

The act of obtaining the equivalent value of a loss or damage that has been inflicted, often through legal or financial means.

Misrepresented Solvency

The act of falsely presenting or lying about the financial stability or liquidity of an entity.

10-day Limitation

A stipulated period in a contract or legal requirement limiting certain actions or filings to within ten days.