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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 IBMs stock

You have taken a long position in a call option on IBM common stock. The option has an exercise price of $176 and IBMs stock currently trades at $180. The option premium is $5 per contract.

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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