Question
You are given the following information concerning options on a particular stock: Stock price = $68 Exercise price = $65 Risk-free rate = 5%
| You are given the following information concerning options on a particular stock: |
| Stock price | = | $68 |
| Exercise price | = | $65 |
| Risk-free rate | = | 5% per year, compounded continuously |
| Maturity | = | 6 months |
| Standard deviation | = | 34% per year |
| a. | What is the intrinsic value of each option? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.) |
| Value | |
| Call option | $ |
| Put option | $ |
| b. | What is the time value of each option? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| Value | |
| Call option | $ |
| Put option | $ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the intrinsic value of each option we first need to determine whether the option is inthemoney atthemoney or outofthemoney An option is s...
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Step: 2
Step: 3
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
11th edition
77861752, 978-0077861759
