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Problem 24-5 Calculating Option Values [LO2]

The price of Swearengen, Inc., stock will be either $78 or $100 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent.

a.	Suppose the current price of the company's stock is $89. What is the value of the call option if the exercise price is $74 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Call value

$

b.	Suppose the current price of the company's stock is $89. What is the value of the call option if the exercise price is $84 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Call value

$

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Hint #1