A call option has a stike price/exercise price of $50 per share. The current market price of

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A call option has a stike price/exercise price of $50 per share. The current market price of the underlying stock is $60 per share.

1. Is the call option “in-the money” or “out-of-the-money”?

2. What is the current price of the call option?

3. An investor buys the call option at the current price. If the current market price of the underlying stock goes to $75 per share, how much will this investor either lose or profit? Show your calculations.

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Introduction To Corporate Finance

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Authors: Laurence Booth, Sean Cleary

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Question Posted: May 23, 2013 04:20 AM

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A call option has a stike price/exercise price of $50 per share. The current market price of

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