At Contract Maturity the Value of a Call Option Is

question 22

Multiple Choice

At contract maturity the value of a call option is ________, where X equals the option's strike price and ST is the stock price at contract expiration.

• A) max (0, ST − X)
• B) min (0, ST − X)
• C) max (0, X − ST)
• D) min (0, X − ST)

---

Definitions:

TED Spread

The difference between the interest rates on three-month U.S. Treasury bills and three-month Eurodollars having identical expiration dates, serving as an indicator of credit risk in the general economy.

LIBOR

The London Interbank Offered Rate, once a benchmark interest rate at which major global banks lend to one another.

Treasury-Bill Rate

The interest rate yield on U.S. government short-term debt securities known as treasury bills.

Reward-to-Variability Ratio

This ratio, often called the Sharpe ratio, measures the return of an investment relative to its risk, whereby a higher ratio indicates a more desirable outcome.