A call option (with shares as the underlying asset) was originally purchased for $0.91 and is now trading for $2.62. The exercise price is $35 and the underlying share is currently trading for $37.43. What is the time value of the option? A. $2.43 B. $-1.52 C. $2.62 D. $0.19

A call option (with shares as the underlying asset) was originally purchased for $0.91 and is now trading for $2.62. The exercise price is $35 and the underlying share is currently trading for $37.43. What is the time value of the option? A. $2.43 B. $-1.52 C. $2.62 D. $0.19

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 2P: The exercise price on one of Flanagan Companys call options is 15, its exercise value is 22, and its...

See similar textbooks

Related questions

Q: of the option is traded at $105 per share at the same time. The option ths and has a strike price of…

A: Intrinsic value of put option can be calculated from strike price and spot prices.

Q: Q1. You have purchased a call option on Johnson & Johnson common stock. The option has an exercise…

A: Call Options are financial contracts that give the buyer an option to buy particular security,…

Q: put option with $3 of premium has an exercise price of $45 . What is the net value of this option at…

Q: Determine the? Black-Scholes value of a? one-year, at-the-money call option on Roslin stock. The?…

A: Information Provided: Volatility = 25% Stock price (S) = $70 Risk free rate (r) = 6% Time to expiry…

Q: An American put option on a non-dividend paying stock has an exercise price of $43 and 4 months to…

A: Exercise price = $43 Price of the underlying stock = $36.81 Risk-free rate = 3.4%

Q: A) What is the price of a $30 strike put? Assume S = $28.50, σ = 0.32, r = 0.04, the stock pays a…

A: S = $28.50 σ = 0.32 r = 0.04 Dividend= 1.0% Option expiry period= 110 days Price of a $30 strike…

Q: ABC Company's current stock price is $100. The risk-free rate is 4%. 38. The payoff to the holder of…

A: Company's current stock price is $100 risk free rate is 4% exercise price is $200 To find: payoff…

Q: c.Consider a call option with an exercise price of $105 and one year to expiration. The underlying…

A: Solution : Binomial Option price Model is that option which provide value of call by using the…

Q: A stock is currently selling for $22.00 per share. Ignoring interest, determine the intrinsic value…

A: Call option gives option buyer the right to by the Stock at a strike price at a specified time in…

Q: A call option is selling at the strike price of $500, with a premium on the option of $50. If the…

A: Break even is price at which there is no profit no loss

Q: Given the following portfolio: Buy one call option on the stock XYZ with a strike price of $52.8 at…

A: Call option strike price = $52.8 Call option premium = $2 Put option strike price = $57.9 Put option…

Q: The stock of Bedrock Solutions is currently trading at $20.00 per share. The 1-month put option with…

A: Time value of put is the price at which due to current situation of market.

Q: A PUT and a CALL option are written on a stock with a strike price of $60. The options are held…

A: Strike Price is $60 Put Premium is $3 Stock price at expiration is $75 To Find:- Put option…

Q: The price of a share follows the geometric Brownian motion with parameters µ = 0.2 and σ = 0.18.…

A: Risk-Neutral price of call option=c=π*c++(1-π)*c-1+r where is the probability, r is the risk-free…

Q: a) What is the price of a $35 strike call? Assume S = $38.50, σ = 0.25, r = 0.06, the stock pays no…

A: Due to uncertain future factors, risk of security prices is rises. To avoid this risk, put and call…

Q: Suppose company XYZ's stock is trading at $68.3. You currently hold a call option with a strike…

A: A call option is an instrument which provides its holder an option to buy an underlying asset on a…

Q: A call option on the stock of Bedrock Boulders has a market price of $7.The stock sells for $30 a…

A: Put-call options are contractual derivative agreements. There exist two parties- one who buys the…

Q: You have purchased a put option on ABC common stock for $3 per contact. The option has an exercise…

A: Given: Put option value = $3 Exercise price = $57 Stock price = $45…

Q: A PUT and a CALL option are written on a stock with a strike price of $60. The options are held…

A: Strike Price = $60 Spot price = $75 Call premium = $16 Put Premium = $3

Q: You buy a share of stock, write a 1-year call option with X= $65, and buy a 1-year put option with…

A: Risk free interest rate is minimum and guaranteed rate which investor get during the life of the…

Q: A PUT and a CALL option are written on a stock with a strike price of $60. The options are held…

A: Put option: This option gives the right to the holder to sell the assets at a specific price and…

Q: The market price of a stock is $35.00. An investor has purchased a call option for 100 shares of…

A: Price of underlying asset = $35 Exercise price = $20 Number of shares = 100 Intrinsic value of the…

Q: A stock with a current market price of $50 has an associated put option priced at $6.5. This put…

A: The put option is the option for selling an underlying security. It is a bearish position which will…

Q: What is the price of $60 strike put? Assume S=$63.75, σ=0.20, r=0.055,the stock pays no dividend and…

A: The answer is as fallows

Q: The Black-Scholes model is used to value call options on the stock of National Co. The following…

A: Black Scholes Model is one of the way to value an option, it could be a call or a put option.…

Q: You have written (sold) a three-month European call option at a strike price of $500. The current…

A: Calculation of underlying price, When the price goes up =Su = S0 * U = S0 * e(SD(t)^0.50) Where S0 =…

Q: Assume a 40 July put option is purchased for GH¢6.50 on a stock selling at GH¢35 per share. If the…

A: The strike price of put option is GH¢40 and price at the time of purchasing the put option was GH¢35…

Q: An investor owns a put option with a strike price of $ 20, the premium paid was $ 2.The stock price…

A: Put option is an option but not the obligation with the holder to sell the underlying asset at a…

Q: A put option on a stock has an exercise price of $31. If the stock price at expiration is $33.40,…

A: given, K = $31 S= $33.40

Q: Assume that the value of a call option using the Black-Scholes model is $8.94. The interest rate is…

A: Call price - Put Price = Spot price - PV of exercise price

Q: Find the current price of a one-year, R110-strike American put option on a non- dividend-paying…

A: A put choice is an agreement giving the proprietor the right, yet not the commitment, to sell–or…

Q: The current market price of a share of a stock is $70.81. If a call option on this stock has a…

A: Market price of a stock = $70.81 Strike price = $75

Q: PUT and a CALL option are written on a stock with a strike price of $60. The options are held until…

A: Put option believe that prices will go down and there will be profit on put if prices goes down.

Q: Assume a stock is selling for GH¢48.50 with options available at 40, 50, and 60 strike prices. The…

A: A put option is an agreement that grants the option buyer the opportunity, but not the…

Q: A PUT and a CALL option are written on a stock with a strike price of $60. The options are held…

A: Call option is a derivative contract that gives the buyer the right but not the obligation to buy…

Q: 2. The current market price of a share of AT&T stock is $50. If a call option on this stock has a…

A: In case of Call option: If Underlying Asset price > call strike Price, then call option is in…

Q: A put option (with shares as the underlying asset) was originally purchased for $1.44 and is now…

A: Intrinsic value is defined as the value of any of the options that have given and were currently…

Q: a) what is the price of a $35 strike call? Assume S=$38.50, σ =0.25, r=0.06, the stock pays no…

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: An option has strike price of $9 and 12 months to expiry. The current price of the underlying share…

A: Options contracts are a kind of financial derivative that involves the agreement between two parties…

Q: A. An option is trading at $5.03. If it has a delta of -.56, what would the price of the option be…

A: Delta of an option is the change in price of option to change in price of underlying.

Q: A PUT and a CALL option are written on a stock with a strike price of $60. The options are held…

A: Note: I am supposed to provide the solution to the question first only. Please repost the remaining…

Q: ack-Scholes price of a call option on a stock which does not pay dividends and has the volatility…

A: The given problem relates to black scholes model.

Question

A. $2.43 B. $-1.52 C. $2.62 D. $0.19

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
A call option on Rosenstein Corporation stock has a market price of $7. Thestock sells for $31 a share, and the option has an exercise price of $25 a share.a. What is the exercise value of the call option?b. What is the premium on the option?
Calculate the profit or loss per share of stock to an investor who buys a call option on a stock whose price is K90 but a call option exercise price if K100 if the stock price at expiration is K105. Calculate the profit or loss for a purchaser of a put option with the same exercise price and expiration?
A PUT and a CALL option are written on a stock with a strikeprice of $60. The options are held until expiration. 1. Calculate the intrinsic value of the CALL option if the stock is currently selling for$75a) $0b) $15c) -$15d) $57e) 63f) None of the above 2. Calculate the breakeven stock price for the CALL option if the premium is $16. What is the time value of the call?a) $63; $1b) $57; $0c) $76; $16d) $55; $3e) $76; $1f) None of the above 3. Suppose the stock price at expiration is $75. Call premium is $16. The CALL optionWRITER’S profit would be:a) -$3b) $3c) -$15d) $15e) None of the above
A PUT and a CALL option are written on a stock with a strikeprice of $60. The options are held until expiration.1. Calculate the intrinsic value of the PUT option if the stock is currently selling for $75.a) $0b) $15c) -$15d) $57e) 63f) None of the above 2. Calculate the breakeven stock price for the PUT option if the premium is $3. What is the time value of the put?a) $63; $3b) $57; $3c) $55; $0d) $76; $0e) $55; $0f) None of the above 3. Suppose the stock price at expiration is $75. Put premium is $3. The PUT optionWRITER’S profit would be:a) -$3b) $3c) -$15d) $15e) None of the above
A call option on the stock of Bedrock Boulders has a market price of $7.The stock sells for $30 a share, and the option has a strike price of $25 ashare. What is the exercise value of the call option? What is the option’stime value?
Ms. Co currently own a put option on Stock A with a strike price of P45. If the current price of Stock A is P40, then what is the in-the-money amount of the option?
Assume a stock is selling for GH¢48.50 with options available at 40, 50, and 60 strike prices.The 50 call option price is at 2.75.a. What is the intrinsic value of the 50 call?b. Is the 50 call in the money?c. Are the 40 and 60 call options in the money?
An investor makes the following three investments: (i) the purchase of a stock for £38(ii) the purchase of a put option for £0.50 with a strike price of £35 and (iii) the sale ofa call option (ie. writing a call option) for £0.50 with a strike price of £40 .(a)What is the intrinsic value and the time value of the put option, What is the maximum profit and loss for this position?
A non – dividend – paying stock with a current price of $52, the strike price is $50, the risk free interest rate is 12% pa, the volatility is 30% pa, and the time to maturity is 3 months? a) Calculate the price of a call option on this stock b) What is the price of a put option price on this stock? c) Is the put-call parity of these options hold?
You have written a call option on Walmart common stock. The option has an exercise price of $81, and Walmart’s stock currently trades at $79. The option premium is $1.60 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit if Walmart’s stock price decreases to $77 and stays there until the option expires? c. What is your net profit on the option if Walmart’s stock price increases to $87 at expiration of the option and the option holder exercises the option?
parts a, b, c Suppose an investor is considering a multi option strategy on a stock with a currentprice of $100. The following strategy is called a strangle. The investor purchases a call optionwith a strike price of $110 for a premium of $5 and purchases a put option with a strike priceof $90 for a premium of $3.a) Draw a payout diagram for the strangle option strategy at expiration.b) Determine the breakeven points for the strangle option strategy.c) Suppose the stock price at expiration is $120. What is the profit for the strangle optionstrategy?d) Suppose the stock price at expiration is $85. What is the profit for the strangle optionstrategy?e) What is the investor speculating on with her option strategy?