Question
A Call Option has an excercise price of $10.00 and an expiry date in six months. The underlying stock is currently trading for $12.00 Required:
A Call Option has an excercise price of $10.00 and an expiry date in six months. The underlying stock is currently trading for $12.00
Required:
A. What is the minimum price an investor would pay for this option? Could an investor profit if the call option was actually trading at $1.00? (5 marks)
B. What is the maximum price an investor would pay for this option? If the option is trading for $13, how could an investor earn a risk-free profit? (5 marks)
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Financial Management Principles And Applications
Authors: Sheridan Titman
9th Edition
0655705457, 9780655705451
