) Deeble Construction Co.\'s stock is trading at $30 a share. Call options on th
ID: 2670269 • Letter: #
Question
) Deeble Construction Co.'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) The options with the $25 strike price will sell for $5.
(b) The options with the $25 strike price will sell for less than the options with the $35 strike price.
(c) The options with the $25 strike price have an exercise value greater than $5.
(d) The options with the $35 strike price have an exercise value greater than $0.
(e) If Deeble's stock price rose by $5, the exercise value of the options with the $25 strike price would also increase by $5.
Explanation / Answer
Option-E is correct.
If Deeble's stock price rose by $5, the exercise value of the options with the $25 strike price would also increase by $5.
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