Question

The price of Ervin Corp. stock will be either $77 or $93 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5.1 percent.
a. Suppose the current price of Ervin stock is $80. What is the value of the call option if the exercise price is $75 per share?
b. Suppose the exercise price is $85 in part (a). What is the value of the call option now?


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  • CreatedOctober 01, 2015
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