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5) Suppose that you are long a $60 American call expiring in 1.5 years on the stock described in problem (2). After one year the
5) Suppose that you are long a $60 American call expiring in 1.5 years on the stock described in problem (2). After one year the stock trades at $62 and you are tempted to exercise it. After thinking for 5 minutes you remember stuff you studied in this class and you decide against doing it. Rather, you decide to sell the call. Why? Explain (clearly). Again, be clear... Stock in problem (2): A non-dividend A non-dividend paying stock currently trading at $50 votality 6= 15% risk-free rate per annum = 2% with continuous compoundry. at = 0.5
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