A Call Option on Dani Corp

question 38

Multiple Choice

A call option on Dani Corp.is trading for $4.50.The strike price of the option is $25 and it has an expiration of 3 months.If the stock of Dani Corp.is trading at $28,how much of the option premium is attributed to intrinsic value?

• A) $1.50
• B) $3.00
• C) $25
• D) $28

---

Definitions:

Fraction

A mathematical expression representing a part of a whole, typically written with a numerator and a denominator.

Exponentiation

A mathematical action that consists of elevating a number to the exponent of another number.

Addition

Addition is the mathematical process of combining two or more quantities to find their total or sum.

Division

The arithmetic operation of dividing one quantity by another, resulting in a quotient and sometimes a remainder.