Consider the following equation: C = P + S - PV(K) - PV(Div)
In this equation, what does the term S represent?
A) the payoff of a zero-coupon bond
B) the strike price of the option
C) the value of the call option
D) the stock's current price

Question

Quizplus · Accepted Answer

S represents the stock's current price in the given equation. This equation is used in financial models to calculate the value of a call option, where C is the call option value, P is the present value of the strike price (P), PV(K) is the present value of the strike price at expiration, and PV(Div) is the present value of dividends paid during the option's life.

Consider the Following Equation: C = P + S -