A Call Option on a Stock Has an Exercise Price

question 26

Multiple Choice

A call option on a stock has an exercise price of $12.15.If the stock price at expiration is $11,what is the option payoff for a short call position?

• A)$-11
• B)$11
• C)$1.15
• D)-$1.15
• E)$0

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Definitions:

Break-Even Sales

The amount of revenue required to cover both the fixed and variable costs of production.

Actual Sales

The exact amount of sales revenue that a company has generated over a specific period, as opposed to projected or forecasted sales.

High-Low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.

Mixed Cost

Mixed cost refers to a cost that contains both variable and fixed cost elements, meaning it changes with the level of activity but not directly proportionate.