Which of the following statements is correct concerning call options?
A) Value of a call option at expiration will be greater than the stock price.
B) Value of a call option at expiration will be equal to the exercise price.
C) Value of a call option at expiration will be equal to the difference between the stock price and exercise price.
D) Value of a call option at expiration will be equal to zero.

Question

Quizplus · Accepted Answer

The value of a call option at expiration will be equal to the difference between the stock price and the exercise price, as the call option gives the holder the right to buy the underlying stock at the exercise price, and if the stock price is higher than the exercise price, the call option will be in-the-money and have intrinsic value. If the stock price is lower than the exercise price or equal to the exercise price, the call option will be out-of-the-money or at-the-money, respectively, and have no intrinsic value. The value of a call option before expiration is influenced by several factors, including the stock price, exercise price, time to expiration, volatility, and interest rates, and can be calculated using various option pricing models.

Which of the Following Statements Is Correct Concerning Call Options