You Own a Call Option on NICo Stock That Expires

question 33

Multiple Choice

You own a call option on NICo stock that expires in one year.The exercise price is $35.The current price of the stock is $37.40 and the risk-free rate of return is 4.25 percent.Assume the option will finish in the money.What is the current value of the call option?

• A)$2.40
• B)$3.83
• C)$3.50
• D)$2.31
• E)$2.50

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Definitions:

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A situation where there is a large supply of workers relative to the demand for labor, which can affect wages and employment levels.

Textiles

Fibrous materials, including cloth and fabric, that are woven, knitted, or otherwise processed for use in producing goods like clothing, home furnishings, and industrial products.

Specialize

The process of focusing on a narrow area of expertise or production to increase efficiency and quality.

Trade Advantage

The benefit or gain that one entity has over another entity in the context of international trade or markets.