Suppose that a stock sells at a price of $40 on the expiration date. Compute the price of a call option if the option strike price is $20.
A) $20
B) $30
C) $40
D) $50

Question

Quizplus · Accepted Answer

A) Price of a call option = Stock Price - Strike Price, if Stock Price is greater than Strike Price;
Price of a call option = $0, if Stock Price is less than or equal to Strike Price.
So, call option = $40 - $20 = $20

Suppose That a Stock Sells at a Price of $40