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

question 7

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:

Unsigned Integers

An integer data type that can only represent non-negative numbers.

Right Shift

A bitwise operation in C and C++ that shifts the bits of a number to the right, dividing the number by two for each shift position.

Arithmetic Shift

A bitwise operation that shifts the bits of its operand and fills the vacant positions with the most significant bit (for signed values), effectively multiplying or dividing the number by two.

#define SQUARE

A preprocessor directive in C/C++ used to define a macro that substitutes an expression with a value or a text string.