The exercise price on one of ORNE Corporation's call options is $35 and the price of the underlying stock is $34. The option will expire in 55 days. The option is currently selling for $0.25.
(a) Calculate the option's exercise value?
(b) Calculate the value of the premium over and above the exercise value? What does this value represent?
(c) Is this an out-of-the money option, at-the-money, or in-the-money? Why?
(d) What will happen to the value of the option if the underlying stock price changes to $34.50? Why?
(e) If this were a put option, would it have a greater or lesser value than the call option? Why?