The price of Paula Corp. stock will be either $70 or $90 at the end of the
Question:
The price of Paula Corp. stock will be either $70 or $90 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 4 percent.
a. Suppose the current price of Paula stock is $75. What is the value of the call option if the exercise price is $65 per share?
b. Suppose the exercise price is $85 in part (a). What is the value of the call option now?
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Step by Step Answer:
To calculate the value of a call option you can use the BlackScholesMerton model However in this cas...View the full answer
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
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