Suppose you purchase a call option to purchase General Motors common stock at $80 per share in March. The current price of GM stock is $83 and the time value of the option is $5. What is the intrinsic value of the option? As the expiration date approaches, what will happen to the size of the time value of the option?
What will be an ideal response?
The intrinsic value of an option is equal to the difference between the current market price and the strike price, which in this case is $83 - $80, or $3. The time value of the option at expiration is zero since the option value equals the intrinsic value.
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The short run for the industry is defined as a period
A. too brief for new firms to enter the industry. B. too brief for old firms to leave the industry. C. in which the number of firms in the industry is fixed. D. All of the responses are correct.
If the U.S. government retires the national debt, then
A) a shift in the demand of loanable funds will cause interest rates to rise. B) a shift in the demand of loanable funds will cause interest rates to fall. C) a shift in the supply for loanable funds will cause interest rates to rise. D) a shift in the supply for loanable funds will cause interest rates to fall. E) there will be an excess supply for loanable funds.
According to new Keynesian economics:
a. the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output. b. the aggregate supply curve is negatively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output. c. the aggregate supply curve is horizontal at relatively low levels of real GDP and becomes positively sloped, as more and more industries reach their full capacity level of output. d. the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes horizontal, as more and more industries reach their full capacity level of output. e. the aggregate supply curve is positively sloped at relatively low levels of real GDP and becomes negatively sloped, as more and more industries reach their full capacity level of output.
The long run is characterized by:
A. the relevance of the law of diminishing returns. B. at least one fixed input. C. insufficient time for firms to enter or leave the industry. D. the ability of the firm to change its plant size.