Calculating Option Values T-bills currently yield 2.1 per cent and the Man Group plc share price is

Question:

Calculating Option Values T-bills currently yield 2.1 per cent and the Man Group plc share price is £0.97.

There is no possibility that the equity will be worth less than £0.50 per share in one year.

(a) What is the value of a call option with a £0.97 exercise price? What is the intrinsic value of a call option with a

£0.97 exercise price?

(b) What is the value of a call option with a £0.70 exercise price? What is the intrinsic value of a call option with a

£0.70 exercise price?

(c) What is the value of a call option with a £1.10 exercise price? What is the intrinsic value of a call option with a

£1.10 exercise price?

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