The price of Tara, Inc., stock will be either $50 or $70 at the end of the

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The price of Tara, Inc., stock will be either $50 or $70 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent.

a. Suppose the current price of Tara stock is $62. What is the value of the call option if the exercise price is $35 per share?

b. Suppose the exercise price is $60 in part (a). What is the value of the call option now?

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Corporate Finance

ISBN: 978-0077861759

10th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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Question Posted: Aug 28, 2014 10:28 AM

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The price of Tara, Inc., stock will be either $50 or $70 at the end of the

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