[Related to the Making the Connection

LOADING...

] Use the following information on call and put options for Facebook to answer the questions below.

FacebookUnderlying stock price: 21.95
		Call			Put
Expiration	Strike	Last	Volume	Open Interest	Last	Volume	Open Interest
Oct	17.00	5.00	21	3,064	0.02	13	14,427
Nov	17.00	5.20	44	795	0.40	485	13,098
Jan	17.00	5.50	1	691	0.55	231	7,381
Apr	17.00	5.70	2	1,409	1.15	69	7,289
Oct	18.00	4.00	49	4,762	0.07	154	22,337
Nov	18.00	4.44	37	4,047	0.50	4426	16,197
Jan	18.00	4.50	10	943	0.80	409	13,754
Apr	18.00	5.22	31	712	1.45	60	6,659

Part 2

The

intrinsic value of the call option that expires in April and has a $17 strike price is

$enter your response here.

(Round your response to two decimal places.)

Part 3

The intrinsic value of the put option that expires in January and has a $18 strike price is

$enter your response here.

(Round your response to two decimal places.)

Part 4

Why would a call with a $18 strike price sell for less than a call with a $17 strike price (for all expiration dates) while a put with a $18 strike price would sell for more than a put with a $17 strike price (for all expiration dates)? (Check all that apply.)

A.

The $18 put is more expensive than the $17 put because the stock price will reach $17 before it hits $18, making the option less valuable at $95 than $105.

B.

The $18 put is more expensive than the $17 put because the stock price will reach $17 before it hits $18, making the option more valuable at $17 than $18.

C.

The $18 call is cheaper than the $17 call because the stock price will reach $17 before it hits $18, making the option more valuable at $17 than $18.

D.

The $18 call is cheaper than the $17 call because the stock price will reach $17 before it hits $18, making the option less valuable at $17 than $18.

Part 5

Suppose you buy the

April

call with a strike price of

$18.

If you exercise it when the price of Facebook is

$26,

what will be your profit or loss?

Your

profit

loss

is

$enter your response here.

(Round your response to two decimal places.)

Part 6

Suppose you buy the

November

put with a strike price of

$17

and the price of Facebook stock remains at $21.95. What will be your profit or loss?

Your

profit

loss

is

$enter your response here

per share. (Round your response to two decimal places.)

The intrinsic value of the call option that expires in April and has a $17 strike price is? (Round your response to two decimal places.) The intrinsic value of the put option that expires in January and has a $18 strike price is \& (Round your response to two decimal places.) A. The $18 put is more expensive than the $17 put because the stock price will reach $17 before it hits $18, making the option less valuable at $95 than $105. B. The $18 put is more expensive than the $17 put because the stock price will reach $17 before it hits $18, making the option more valuable at $17 than $18. C. The $18 call is cheaper than the $17 call because the stock price will reach $17 before it hits $18, making the option more valuable at $17 than $18. D. The $18 call is cheaper than the $17 call because the stock price will reach $17 before it hits $18, making the option less valuable at $17 than $18. Suppose you buy the April call with a strike price of $18. If you exercise it when the price of Facebook is $26, what will be your profit or loss? Your is $ (Round your response to two decimal places.) Suppose you buy the November put with a strike price of $17 and the price of Facebook stock remains at $21.95. What will be your profit or loss? Your is 9 per share. (Round your response to two decimal places.)