Part I OPTION PRICING PRINCIPLES

The following quotes were for the IBM American options on June $1$ of a given year. Use this information to answer questions $1-4.$

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The risk$-$free rates are $7\mathrm{.}30\%($June$)$ and $7\mathrm{.}50\%($July$).$ The times to expiration are $\mathrm{.}0384($June$)$ and $.1342($July$).$ Assume no dividends.

What is the intrinsic value of the June $115$ call?

a$.0$

b$.1\mathrm{.}50$

c$.1\mathrm{.}75$

d$.2\mathrm{.}75$

e$.$ None of the above

What is the time value of the June $115$ call?

a$.0$

b$.1\mathrm{.}50$

c$.1\mathrm{.}75$

d$.2\mathrm{.}75$

e$.$ None of the above