Smith Enterprises Stock Currently Sells for $17

question 82

Multiple Choice

Smith Enterprises stock currently sells for $17.50.A call option on the stock has a strike price of $15 and currently sells at $4.50.What is the time value of the option?

• A) $2.50
• B) $0
• C) $2.00
• D) $4.50

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Definitions:

Put Option

A financial contract that gives the buyer the right, but not the obligation, to sell an asset at a specified price within a specific time frame.

Actual Value

Actual value refers to the true, inherent, or market value of an asset, not influenced by external conditions such as market fluctuations or investor perceptions.

Time Value

A concept stating the value of money is affected by time, primarily due to the potential earning capacity of money over time.

Stock Volatility

This is a measure of the fluctuation in the price of a stock over time, indicating the security's stability or instability.