The Current Price of a Call Is $5 and the Stock

question 34

Multiple Choice

The current price of a call is $5 and the stock is trading at $50. The delta and gamma of the call are 0.5 and 0.05, respectively. If the stock price increases to $50.50, then approximate the new call price using the information given:

• A) $5.24375
• B) $5.25
• C) $5.25625
• D) $5.2625

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Definitions:

Economic Problem

The fundamental challenge of having limited resources to meet unlimited wants, necessitating choices and priorities in resource allocation.

Scarce Resources

Resources that are limited in supply and cannot fulfill all human wants and needs completely, leading to the necessity of choices and priorities in their use.

Marginal Rate

Often refers to the marginal tax rate, which is the tax rate applied to an additional dollar of income.

Transformation

In an economic context, it refers to the process of changing inputs into outputs, often related to the production process in industries or economies.