Question
The following table presents the data on ABC Corp.s call options at different stock prices. Based on your understanding of exercise value and options prices,
The following table presents the data on ABC Corp.s call options at different stock prices. Based on your understanding of exercise value and options prices, completed the table with a strike price of $24.00: (all values in $)
Stock Price | Strike Price | Exercise Price | Market Price of Option | Time Value |
24 | 24 | 0 | 1.56 | ? |
48 | 24 | ? | 26.10 | 2.10 |
60 | 24 | ? | 38.40 | 2.40 |
66 | 24 | 42 | 44.60 | ? |
72 | 24 | ? | 52 | 4 |
After two weeks, the stock priec of ABC Corp. increases to $79.20. Suppose you purchased the shares for $48.00 and are planning to sell them at $79.20; your rate of return will be ________% on that transaction?
After your analysis, you decided to purchase the option for $26.10, hwich gives you the right to buy ABC Corp.'s stock at $24.00. If you exercise the option by purchasing the stock at the strike price, you could immediately sell the share of the stock at its market price of $79.20. This will result in a payoff, and the rate of return on your option will be __________%.
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