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You have purchased a put option on Pfizer common stock. The option has an exercise price of $27 and Pfizer stock currently trades at $29.
- You have purchased a put option on Pfizer common stock. The option has an exercise price of $27 and Pfizer stock currently trades at $29. The option premium is $0.50 per contract.
- What is the intrinsic value of the option?
- What is the time value of the option?
- What is your net profit on the option if Pfizers stock price does not change over the life of the option?
- What is your net profit on the option if Pfizers stock price falls to $23 and you exercise the option?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
