You Currently Own a One-Year Call Option on Way-One, Inc

Multiple Choice

You currently own a one-year call option on Way-One, Inc. stock. The current stock price is $26.50 and the risk-free rate of return is 4 percent. Your option has a strike price of $20 and you assume that it will finish in the money. What is the current value of your call option?

A) $6.25
B) $6.50
C) $6.76
D) $7.13
E) $7.27