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T-bills currently yield 4.3 percent. Stock in Octagon Manufacturing is currently selling for $55 per share. There

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T-bills currently yield 4.3 percent. Stock in Octagon Manufacturing is currently selling for $55 per share. There is no possibility that the stock will be worth less than $50 per share in one year.
a. What is the value of a call option with a $45 exercise price? What is the intrinsic value?
b. What is the value of a call option with a $35 exercise price? What is the intrinsic value?
c. What is the value of a put option with a $45 exercise price? What is the intrinsic value?
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Corporate Finance Core Principles and Applications

Corporate Finance Core Principles and Applications

ISBN: 978-0077905200

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Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford

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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.

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