The value of a call option just prior to expiration is (where V is the underlying asset's market price and X is the option's exercise price)
A) max [0, V - X].
B) max [0, X - V].
C) min [0, V - X].
D) min [0, X - V].
E) max [0, V X].

Question

The value of a call option just prior to expiration is (where V is the underlying asset's market price and X is the option's exercise price)
A) max [0, V - X].
B) max [0, X - V].
C) min [0, V - X].
D) min [0, X - V].
E) max [0, V > X].

Quizplus · Accepted Answer

The value of a call option just prior to expiration is determined based on the difference between the underlying asset's market price (V) and the option's exercise price (X). The formula for the value of a call option is max [0, V - X]. Therefore, the correct choice is A as it uses this formula and takes into account the possible zero value of the option.

The Value of a Call Option Just Prior to Expiration