A 45 Call Option on a Stock Priced at $50

question 73

Multiple Choice

A 45 call option on a stock priced at $50 is priced at $6.50.This call has an intrinsic value of ______ and a time value of _____.

• A) $6.50; $0
• B) $5.00; $1.50
• C) $1.50; $5.00
• D) $0; $6.50

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Definitions:

Carrying Costs

Expenses associated with holding inventory, including storage, insurance, and opportunity costs, impacting a company's financial performance.

Orders

Directions or commands given by authority, or customer requests for goods or services.

Revolving Line

A type of credit facility that allows a borrower to withdraw, repay, and re-borrow funds up to a specified credit limit.

Commitment Fee

A charge imposed by a lender on a borrower for not utilizing a credit line or for funds that have not been disbursed.