You have taken a long position in a call option on IBM common stock. The option has

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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $176 and IBM’s stock currently trades at $180. The option premium is $5 per contract. (LG 10-4)

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

b. What is your net profit on the option if IBM’s stock price increases to $190 at expiration of the option and you exercise the option?

c. What is your net profit if IBM’s stock price decreases to $170?

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Financial Markets And Institutions

ISBN: 9781259919718

7th Edition

Authors: Anthony Saunders, Marcia Cornett

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Question Posted: Jul 25, 2024 08:02 AM

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You have taken a long position in a call option on IBM common stock. The option has

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Financial Markets And Institutions

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