The price of Ervin Corp. stock will be either $63 or $77 at the end of the

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The price of Ervin Corp. stock will be either $63 or $77 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 4 percent.

a. Suppose the current price of the stock is $68. What is the value of the call option if the exercise price is $60 per share?

b. Suppose the exercise price is $70 in part (a). What is the value of the call option now?

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Corporate Finance

ISBN: 978-1259918940

12th edition

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

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Question Posted: Dec 09, 2019 07:20 AM

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The price of Ervin Corp. stock will be either $63 or $77 at the end of the

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a The value of the call is the stock price minus th...View the full answer

Corporate Finance

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