When the Exercise Price of a Call Option Is Higher

question 41

Multiple Choice

When the exercise price of a call option is higher than the current price of the stock,the option is said to be:

• A)at-the-money.
• B)in-the-money.
• C)out-of-the-money.
• D)trading at par.
• E)trading below par.

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Definitions:

Debt Financing

The method of raising capital through the sale of bonds, bills, or notes to individuals or institutions.

Interest Tax Shield

The reduction in income taxes that results from taking the interest expense as a deductible charge.

Capital Structure

The capital structure is the mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which funds its overall operations and growth.

Tax Rates

The segment of earnings an individual or corporate entity owes to the government in taxes.