Deeble Construction Co.’s stock is trading at $30 a share. There are also call o

Question

Deeble Construction Co.’s stock is trading at $30 a share. There are also call options on the company’s stock, some with an exercise price of $25 and some with an exercise price of $35. All options expire in three months. Which of the following best describes the value of these options? a. The options with the $25 exercise price will sell for less than the options with the $35 exercise price. b. The options with the $25 exercise price have an exercise value equal to $5. c. The options with the $25 exercise price will sell for $5. d. The options with the $35 exercise price have an exercise value greater than $0

Explanation / Answer

correct option is "D" - The options with the $25 exercise price will sell for $5

As option is premium consisit of intrinsic value and time value of money .so option will have atleast $ 5 as premium

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