The following price quotations on IBM were taken from the Wall Street Journal. $\begin{array}{l|l|l}
\text { Stock Price } & \text { Strike Price } & \text { February } \
\ 917 / 8 & 85 & 73 / 8 \
\hline 917 / 8 & 90 & 31 / 8 \
\hline 917 / 8 & 95 & 5 / 8
\end{array}$
The premium on one IBM February 90 call contract is

Question

The following price quotations on IBM were taken from the Wall Street Journal. $\begin{array}{l|l|l}
\text { Stock Price } & \text { Strike Price } & \text { February } \
\ 917 / 8 & 85 & 73 / 8 \
\hline 917 / 8 & 90 & 31 / 8 \
\hline 917 / 8 & 95 & 5 / 8
\end{array}$
 The premium on one IBM February 90 call contract is

Quizplus · Accepted Answer

The premium is calculated as the difference between the stock price and the strike price, plus the option price. Here, it is $(9 \frac{1}{8} - 9) + 3 \frac{1}{8} = 0.125 + 3.125 = 3.25$. Since each contract covers 100 shares, the premium is $3.25 \times 100 = 325$, but the correct calculation should be $3.125 \times 100 = 312.50$, which matches option C.

The Following Price Quotations on IBM Were Taken from the Wall