Datacorp Stock Currently Trades at $50

question 71

Multiple Choice

Datacorp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate the value of the time premium between the August and October options.

• A) -$0.50
• B) $0
• C) $0.50
• D) $5
• E) -$5

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to fund its day-to-day operations.

Earnings Per Share

A financial metric that calculates the portion of a company's profit allocated to each outstanding share of common stock, indicating the company's profitability.

Earnings Per Share

A financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.

Dividend Payout Ratio

The percentage of earnings paid to shareholders in dividends, indicating how much money a company returns to shareholders versus retaining.