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6. Suppose you believe that the price of Stock X is going to increase from its current level of $18 during the next several months.
6. Suppose you believe that the price of Stock X is going to increase from its current level of $18 during the next several months. For $4 you buy a call option giving you the right to buy 1 share at a price of $24 per share. [12 points] a. What is the exercise value of the option now? X is going to increase from its curent level of 18 during b. What is the time value of the option? c. Calculate the net profit (dollars) if the option is purchased and the stock price rises to $30? d. Calculate the net profit percentage (rate of return) on the option. e. Calculate the breakeven price of the stock--the stock price that would produce neither a net profit nor a net loss for the buyer of the call option. (Ignore any option time value.) f. Suppose you are the writer of this call option. If the price of the stock is $24 at the expiration date, calculate the dollar amount of income you earned by writing the option
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