Suppose you purchase a call option to buy IBM common stock at $35 per share in September. The current price of IBM is 37 and the option premium is 4
What is the intrinsic value of the option? As the expiration date on the option approaches, what will happen to the size of the option premium?
The intrinsic value of the option is the difference between the current market price of IBM and the strike price. In this case, the intrinsic value would be $2. As the expiration date approaches, the size of the option premium will approach its intrinsic value.
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Aside from being a means of payment, the other functions of money are
A) medium of exchange and the ability to buy goods and services. B) medium of exchange, unit of account, and means of lending. C) pricing, contracts, and store of value. D) medium of exchange, unit of account, and store of value.
The most commonly used tool by the Federal Reserve to control the monetary base is
a. changes in the discount rate. b. changes in tax rates on commercial banks. c. changes in legal required reserve ratios. d. open market operations.
Color television prices rise by 10 percent, and in response the quantity of those TVs supplied increases by 6 percent. The supply elasticity for color television sets in that price range is
A) 0.6. B) 1.66. C) 6.0. D) -1.66.
In the basket of goods that is used to compute the consumer price index, the three largest categories of consumer spending are
a. housing, transportation, and recreation. b. housing, transportation, and food & beverages. c. housing, food & beverages, and education & communication. d. housing, medical care, and education & communication.