A company's stock is trading at $30 a share. Call options on the company's stock are also available, some with a strike price of $25 and some with a strike price of $35. Both options expire in three months. Which of the following best describes the value of these options?
A company's stock is trading at $30 a share. Call options on the company's stock are also available, some with a strike price of $25 and some with a strike price of $35. Both options expire in three months. Which of the following best describes the value of these options?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A company's stock is trading at $30 a share. Call options on the company's stock are also available, some with a strike price of $25 and some with a strike
price of $35. Both options expire in three months. Which of the following best describes the value of these options?
If the stock price rose by $5, the exercise value of the options with the $25 strike price would also increase by $5.
The options with the $25 strike price will sell for less than the options with the $35 strike price.
O The options with the $25 strike price have an exercise value greater than $5.
The options with the $25 strike price will sell for $5.
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