1. Madeline Manufacturing Inc.s current stock price is $35 per share. Call options for this stock exist that permit the holder to purchase one share at an exercise price of $30.These options will expire at the end of 1 year, at which time Madelines stock will be selling at one of two prices $25 or $45. The risk-free rate is 5.5%. Using the binomial option pricing model, create a riskless hedged investment and answer the following question:

After the payoffs have been equalized and the riskless hedged investment is created, what is the value of the portfolio in one year? Round your answer to two decimals if needed.

2.

A call option on the stock of Bedrock Boulders has a market price of $7. The stock sells for $29 a share, and the option has a strike price of $24 a share. What is the exercise value of the call option? $

What is the option's time value? $

3. The exercise price on one of Flanagan Company's options is $14, its exercise value is $21, and its time value is $5. What are the option's market value and the price of the stock?

Option's market value	$
Price of the stock	$

4.

Assume that you have been given the following information on Purcell Industries:

Current stock price = $17	Strike price of option = $11
Time to maturity of option = 4 months	Risk-free rate = 7%
Variance of stock return = 0.15
d1 = 2.162955	N(d1) = 0.984728
d2 = 1.939348	N(d2) = 0.973771

According to the Black-Scholes option pricing model, what is the option's value? Round your answer to the nearest cent.

$