Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required: a. You have just purchased the options listed below. Based on the information given, indicate whether the option is in the money, or out

image text in transcribed
Required: a. You have just purchased the options listed below. Based on the information given, indicate whether the option is in the money, or out of the money, whether you would exercise the option if it were expiring today, what the dollar profit would be, and what the percentage return would be. (Enter "O" If there is no profit or return from not exercising the option. Round your answers to 2 decimal places. Loss amounts should be indicated by a minus sign.) Nat Profit Return Company ABC ABC Option Call Put Call Put Today's Stock Strike Price In/Out of the Money? $ 10.00 $ 10.26 In the money $ 10.00 $ 10.26 Out of the money $ 25.00 $ 23.93 (Out of the money $ 25.00 $ 23.93 in the money Premium Exercise $ 0.90 Yes $ 0.75 No $ 0.85 No $ 2.05 Yes XYZ XYZ ll ***** % b. Now suppose that time has passed and the stocks' prices have changed as indicated in the table below. Recalculate your answers to part a. (Enter "o" if there is no profit or return from not exercising the option. Round your answers to 2 decimal places.) In/Out of the Money? Exercise? Net Profit Return Company ABC ABC XYZ XYZ Option Call Put Cal Put Today's Stock Strike Price $ 10.00 $ 11.23 $ 10.00 $ 11.23 $ 25.00 5 27.00 $ 25.00 $ 27.00 Premium $ 0.90 $ 0.75 $ 0.85 $ % 205 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Investors Guidebook To Fixed Income Investments

Authors: Stuart R. Veale

1st Edition

0735205310, 978-0735205314

More Books

Students also viewed these Finance questions