Buyer Company bought 100 options of Target Co one year ago and would like to exercise them today. The options were purchased at $24 each, and they expire when trading ends today (assume there is no speculative premium left.) Target common stock is selling today for $50 per share. The exercise price is $30 and each option entitles the holder to purchase two shares of stock, each at the exercise price. If the options are exercised today, what would Buyer Company’s dollar profit or loss be?

Buyer Company bought 100 options of Target Co one year ago and would like to exercise them today. The options were purchased at $24 each, and they expire when trading ends today (assume there is no speculative premium left.) Target common stock is selling today for $50 per share. The exercise price is $30 and each option entitles the holder to purchase two shares of stock, each at the exercise price. If the options are exercised today, what would Buyer Company’s dollar profit or loss be?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 2P

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