A 32.50 call option on a stock priced at $37.30 is priced at $6.80. This call ha
ID: 2764908 • Letter: A
Question
A 32.50 call option on a stock priced at $37.30 is priced at $6.80. This call has an intrinsic value of ______ and a time value of _____.
A stock with a current market price of $50 and a strike price of $45 has an associated put option priced at $3.50. This put has an intrinsic value of ______ and a time value of _____.
The stock price of Bravo Corp. is currently $175. The stock price a year from now will be either $305 or $130 with equal probabilities. The interest rate at which investors invest in riskless assets is 6%. Using the binomial OPM, the value of a put option with an exercise price of $215 and an expiration date 1 year from now should be worth __________ today.
Explanation / Answer
Solution : Note : as per chegg policy solving 1 question and subparts of that all question. $ option premium (P) = 6.8 Strike price (X) = 32.5 Stock price (St) = 37.3 As St > X , in call option so it is In the money option [1] intrinsic value = /St - X/ = /37.3 - 32.5 / = 4.8 [2] time value = option premium - intrinsic value = 6.8 - 4.8 = 2
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