You have taken a long position in a call option on IBM com- mon stock. The option

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You have taken a long position in a call option on IBM com- mon stock. The option has an exercise price of $136 and IBM's stock currently trades at $140. The option premium is $5 per contract. (LG 10-4)

a. What is your net profit on the option if IBM's stock price increases to $150 at expiration of the option and you exercise the option?

b. How much of the option premium is due to intrinsic value versus time value?

c. What is your net profit if IBM's stock price decreases to $130?

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Financial Markets And Institutions

ISBN: 9780078034664

5th Edition

Authors: Anthony Saunders, Marcia Cornett

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Question Posted: Jul 24, 2024 07:01 AM

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You have taken a long position in a call option on IBM com- mon stock. The option

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Financial Markets And Institutions

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