Explanation

For a call option at expiration:

Value of call at expiration = Max(0, Stock Price - Strike Price)

Given:

• Call premium paid = $24.70 (this is not relevant for the expiration value calculation)
• Strike price = $670
• Value at expiration = $47.60

We need to find the underlying price (S) at expiration:

$47.60 = Max(0, S - $670)

Since the call has positive value ($47.60 > 0), the option is in-the-money, so:

$47.60 = S - $670

Solving for S: S = $670 + $47.60 = $717.60

Therefore, the underlying price at expiration is $717.60.

Why other options are incorrect:

• A. $622.40: This would be below the strike price ($670), making the call worthless (value = $0), not $47.60
• B. $692.90: This would give a call value of $692.90 - $670 = $22.90, not $47.60

Key Concept: At expiration, a call option's value equals the maximum of zero or the difference between the underlying asset price and the strike price. The premium paid initially is a sunk cost and doesn't affect the expiration value calculation.