The Stock Price Is $34

question 18

Multiple Choice

The stock price is $34. The strike price of a three-month European call option is $32. If the call option is priced at $5, and the risk-free rate of interest is 2%, and the stock pays a dividend of $1 in one month, then the time value of the option is

• A) 1.16
• B) 2.16
• C) 3.16
• D) 4.16

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