A 6-month call option on Meyers Inc.'s stock has a strike price of $45 and sells in the market for $8.25.Meyers' current stock price is $48.What is the option premium?
A)$4.25
B)$4.73
C)$5.25
D)$5.78
E)$6.35

Question

Quizplus · Accepted Answer

The option premium is equal to the market price of the option, which is given as $8.25. The current stock price of Meyers Inc. is $48. Therefore, the option is in-the-money because the strike price is lower than the stock price. The intrinsic value of the option is $48 - $45 = $3. The remaining $8.25 - $3 = $5.25 is the time value of the option. Hence, the option premium is $8.25.

A 6-Month Call Option on Meyers Inc