Time Value of Options You are given the following information concerning options on a particular stock: Stock

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Time Value of Options You are given the following information concerning options on a particular stock:

Stock price = $83 Exercise price = $80 Risk-free rate = 6% per year, compounded continuously Maturity = 6 months Standard deviation = 53% per year

a. What is the intrinsic value of the call option? Of the put option?

b. What is the time value of the call option? Of the put option?

c. Does the call or the put have the larger time value component? Would you expect this to be true in general?

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Corporate Finance With Connect Access Card

ISBN: 978-1259672484

10th Edition

Authors: Stephen Ross ,Randolph Westerfield ,Jeffrey Jaffe

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