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A stock is priced at $33, a call option with 3 months until maturity has a strike price of $33, chose three things that can be said for certain about this option
A stock is priced at $33, a call option with 3 months until maturity has a strike price of $33, chose
three things that can be said for certain about this option.
A) It is in the money
B) It is not in the money
C) It is at the money
D) Time value of the option is zero
E) Time value of the option Is not zero
F) Intrinsic value of the option is zero
G) Intrinsic value of the option is not zero
H) The stock price must have low volatility
I) The stock price must have high volatility
J) The risk free rate must be low
K) The risk free rate must be high
Expert Solution
Ans)
B) It is not in the money
C) It is at the money
F) Intrinsic value of the option is zero
Reason : At the money call option is when strike price is equal to current market price, where as in the money call option is when market price per share is greater than strike price
Further Intrinsic value of call option = Current market price - Strike price
= 33 - 33
= 0
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