SIE Exam Question 788: Answer and Explanation

Question: 788

An investor purchased a call option for $3.00. The option has a strike price of $37.00, and the stock is currently valued at $36.00. The call option would cost $2.50 if purchased today. Ignoring transaction costs, what is the value of the option?

  • A. -$0.50
  • B. $0
  • C. $1.00
  • D. $2.00

Correct Answer: B

Explanation:

The call option is out-of-the-money because the strike price ($37.00) exceeds the market price ($36.00). Therefore, the value of the option is $0.

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