2. 4. Calculating option values [LO 24.2] The price of Angurugu Wool Company shares will be either...

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2. 4.

Calculating option values [LO 24.2] The price of Angurugu Wool Company shares will be either $67 or $91 at the end of the year. Call options are available with one year to expiration. Treasury notes currently yield 4 per cent.

1. Suppose the current price of the company’s shares is $75. What is the value of the call option if the exercise price is $65 per share?

2. Suppose the exercise price is $80 in part (a). What is the value of the call option now?

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