a. Rework Problem 18-4 using the spreadsheet model.
b. Construct data tables for the intrinsic value and Black-Scholes exercise value for this option and graph the relationship. Include possible stock price values ranging up to $30.
c. Suppose this call option is purchased today. Draw the profit diagram of this option position at expiration.
d. Given the following information, create a riskless hedge to determine the value of the firm’s call option given the following information:
Current stock price = $25………………..Exercise price = $30
Option expiration = 6 months…………… Risk-free rate = 5%
At the end of the 6 months, the firm’s stock will be worth $20 or $40. What is the value of the firm’s call option?