Consider the following equation: C = P + S - PV(K)- PV(Div)
In this equation, what does the term C represent?
A)the current share price
B)the payoff of a zero-coupon bond
C)the value of the call option
D)the exercise price of the option

Question

Quizplus · Accepted Answer

The term C in the equation represents the value of the call option. The other terms in the equation (P, S, PV(K), PV(Div)) represent the price of the underlying stock, the exercise price of the option, the present value of the exercise price, and the present value of the dividends, respectively. Therefore, the equation is used to calculate the value of a call option based on these inputs.

Consider the Following Equation: C = P + S -