According to the Black-Scholes Model, a call option has a value of 4,500. The underlying asset currently has a total market value of 140,000 and the total exercise price of the option is 138,000. If the market price of call option 4,200, which of the following statement is false? a.) if the option is exercisable as of date, the holder may exercise the call option because the option is in-the-money by 2,000 b.) if the option is exercised, the effect cost of the purchased underlying asset would be 144,500 c.) if a potential buyer prioritizes certainty in cash outflows, the buyers should acquire the call option even if the market value of the underlying asset decreases. d.) a potential buyer should acquire the call option because the total value of the option based on Black-Scholes-Model is greater than its market value.

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
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According to the Black-Scholes Model, a call option has a value of 4,500. The underlying asset currently has a total market value of 140,000 and the total exercise price of the option is 138,000. If the market price of call option 4,200, which of the following statement is false?

a.) if the option is exercisable as of date, the holder may exercise the call option because the option is in-the-money by 2,000

b.) if the option is exercised, the effect cost of the purchased underlying asset would be 144,500

c.) if a potential buyer prioritizes certainty in cash outflows, the buyers should acquire the call option even if the market value of the underlying asset decreases.

d.) a potential buyer should acquire the call option because the total value of the option based on Black-Scholes-Model is greater than its market value.

 

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