The Intrinsic Value of a Call Option Is Equal to ________

question 39

Multiple Choice

The intrinsic value of a call option is equal to ________.

• A) the stock price minus the exercise price
• B) the exercise price minus the stock price
• C) the stock price minus the exercise price plus any expected dividends
• D) the exercise price minus the stock price plus any expected dividends

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Definitions:

Economic Profit

The profit from undertaking an activity after subtracting both the explicit and implicit costs associated with that activity.

Implicit Costs

Expenses that do not involve a direct monetary payment but represent the opportunity cost of using resources owned by the company or individual.

Average Cost of Production

The total cost of production divided by the quantity of output produced, indicating the cost to produce each unit of output.

Total Profit

The net profit a company earns, calculated by deducting all costs from its total income.