CVA Exam Dumps | Imagine that an investor in the common stock of a company has two choices, either to (1) but 100 shares

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Question 103/251

Imagine that an investor in the common stock of a company has two choices, either to (1) but 100 shares of a company's common stock at $10 per share or (2) to purchase a call for $125 to purchase
100 shares at the same $10 price at the end of nine months. If the investor chooses to buy the stock, the investor must pay $1,000 immediately and is at risk for the entire $1,000 investment. If the investor chooses to purchase the call option, the investor will pay only $125 immediately and can wait until the option's expiration date to decide whether or not to buy the stock for an additional $1,000. The investor's risk is limited to $125. If the option is ____________________, the option will be exercised. If it is
____________________, the option will simply lapse.

A. At-the-money, In-of-the-money

B. In-the-money, Out-of-the-money

C. At-the-money, Out-of-the-money

D. At-the-money, At-of-the-money

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Question 103/251

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