Call Option [5] You bought a call contract three weeks ago. The expiry date of the calls

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Call Option [5]

You bought a call contract three weeks ago. The expiry date of the calls is five weeks from today. On that date, the price of the underlying stock will be either 120 or 95. The two states are equally likely to occur. Currently, the stock sells for 96. The exercise price of the call is 112. Each call gives you the right to buy 100 shares at the exercise price. You are able to borrow money at 10% per annum. What is the value of your call contract?

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Lectures On Corporate Finance

ISBN: B00RGENH5I

1st Edition

Authors: Peter L Bossaerts ,Bernt Arne Odegaard

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