Question

The current market price of a share of Boeing stock is $50. If a call option on this stock has a strike price of $55, the call

Group of answer choices

1.) is out of the money.

2.) is in the money.

3.) sells for a higher price than if the market price of Boeing stock is $40.

4.) 1 and 3.

5.) 2 and 3.

Answer 1

The answer to the question is 1) out of money

This is because as the call option is at strike price for $55 and the current price is $50. It doesn't make economic sense to buy at $55 and incurr a loss of $5

Why other options are incorrect?

2) the options is not itm

3.) If the market price is $40, it sells for a lower price since the option is deeper out of money as there is loss of $15

4 and 5 are incorrect as obvious

I hope this makes sense and helps you

Feel free to ask anything in comments

Also press the like button

Thanks & Regards