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On April 4, Alam Company Purchased a Call Option on 10,000

Question 32

Multiple Choice

On April 4, Alam Company purchased a call option on 10,000 bushels of corn with delivery on June 30.The strike price is $2.15 per bushel.The value of the option and the market value of the corn are as follows. ?
 Value of the option  Value of the corn  Apri1 4 $1,830$20,400 Apri1 30 2,01022,500 May 31 2,53023,800 June 30 2,70024,200\begin{array} { l r r } & \text { Value of the option } & \text { Value of the corn } \\ \text { Apri1 4 } & \$ 1,830 & \$ 20,400 \\\text { Apri1 30 } & 2,010 & 22,500 \\\text { May 31 } & 2,530 & 23,800 \\\text { June 30 } & 2,700 & 24,200\end{array}


A) On April 4, the intrinsic value of the option is $1,100.
B) On April 30, the time value of the option is $1,010.
C) On May 31, the intrinsic value of the option is $230.
D) On June 30, the time value of the option is $2,700.

Correct Answer:

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