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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $176 and page 352IBMs
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $176 and page 352IBMs stock currently trades at $180. The option premium is $5 per contract. (LG 10-4)
a. How much of the option premium is due to intrinsic value versus time value?
b. What is your net profit on the option if IBMs stock price increases to $190 at expiration of the option and you exercise the option?
c. What is your net profit if IBMs stock price decreases to $170?
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Financial Management Principles and Applications
Authors: Sheridan Titman, Arthur Keown, John Martin
12th edition
133423824, 978-0133423822
