You have taken a long position in a call option on IBM com- mon stock. The option has an exercise price of $176 and IBMs stock currently trades at $180. The option premium is $7.75 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?