You have taken a long position in a call option on IBM common stock. The option has
Question:
a. How much of the option premium is due to intrinsic value versus time value?
b. What is your net profit on the option if IBM’s stock price increases to $ 190 at expiration of the option and you exercise the option?
c. What is your net profit if IBM’s stock price decreases to $ 170?
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Step by Step Answer:
a The intrinsic value of the option is 4 180 176 Thus the tim...View the full answer
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Related Book For 
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett
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