When the stock price has risen above the exercise price, the value of a call option is equal to the stock price:
A)less the value of the dividend.
B)less the value of the option.
C)less the present value of the exercise price.
D)less the exercise price.

Question

Quizplus · Accepted Answer

The value of a call option when the stock price has risen above the exercise price is equal to the stock price less the present value of the exercise price. This accounts for the time value of money, as the exercise price is paid at a future date.

When the Stock Price Has Risen Above the Exercise Price