The Following Quotes Were Observed for Options on a Given

question 46

Multiple Choice

The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.

The stock price was 113.25. The risk-free rates were 7.30 percent (November) , 7.50 percent (December) and 7.62 percent (January) . The times to expiration were 0.0384 (November) , 0.1342 (December) , and 0.211 (January) . Assume no dividends unless indicated.
-What is the intrinsic value of the November 115 call?

• A)1.50
• B)0.00
• C)2.80
• D)1.75
• E)none of the above

---

Definitions:

Island Arc

A curved chain of volcanic islands located at a tectonic plate margin, above a subducting zone.

Linear Island Chain

A series of islands aligned in a straight line, often created by the movement of a tectonic plate over a stationary hotspot in the Earth's mantle.

Seamount

A submarine mountain, in some cases flat-topped, that rises above the seafloor.

Pacific Ocean

The largest and deepest of the world's ocean basins, extending from the Arctic in the north to the Antarctic in the south.