A stock that is currently selling for $47 has the following six-month options outstanding:

a) Which option(s) is (are) in the money?
b) What is the time premium paid for each option?
c) What is the profit (loss) at expiration given different prices of the stock' $30, $35, $40, $45, $50, $55, and $60'if the investor buys the call with the $45 strike price?
d) What is the profit (loss) at expiration given different prices of the stock' $30, $35, $40, $45, $50, $55, and $60'if the investor buys the call with the $50 strike price? Compare your answers to (c) and (d).
e) What is the range of stock prices that will generate a profit if the investor buys the stock and sells the call with the $50 strike price?
f) What is the range of stock prices that will generate a profit if the investor buys the stock and sells the call with the $45 strike price? Compare your answers to (e) and(f).

Transcribed Image Text:

Call option Call option Strike Price $45 50 Market Price $4