You own a call option on Intuit stock with a strike price of $40. The option will

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You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months’ time.

a. If the stock is trading at $55 in three months, what will be the payoff of the call?

b. If the stock is trading at $35 in three months, what will be the payoff of the call?

c. Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration.

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.

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Fundamentals of Corporate Finance

ISBN: 978-0132148238

2nd edition

Authors: Berk, DeMarzo, Harford

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Question Posted: Jan 14, 2012 02:25 AM

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You own a call option on Intuit stock with a strike price of $40. The option will

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Plan Value the call if the stock is selling at 55 and 35 Draw a payoff diagr...View the full answer

Fundamentals of Corporate Finance

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