Question: can you please explain case B why is there a $5 loss? and is there a equation to show that ZUUI. ITILUITIU Purchasing American call

can you please explain case B why is there a $5 loss? and is there a equation to show that

ZUUI. ITILUITIU Purchasing American call OPTION Buye prera tur Example A Buying a call option on Apple Assume Apple share price = $100 Purchase American call option - Option price = $5 - Strike price = $120 . Expiration = 3 months from now Case A: price goes to $150 Exercise option Buy at $120, sell at $150 - Total = 150-120-5 = +$25 gain Case B: price goes to $90 - Don't exercise option - Total = -5 (lose entire investment [the premium])

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

I am wondering if anyone has corrected solutions to fnce 300 assignments 1 2 and 3. I am concered about my answers and would love to compare. Pretty sure on my answers for 1 and 2 mainly interested...

An investor is analyzing the costs of two-year, European options for aluminum and zinc at a particular strike price. For each ton of aluminum, the two-year forward price is 1400, a call option costs...

What factors should be considered in deciding whether the cost of capital for a foreign affiliateshould be higher, lower, or the same as the cost of capital for a comparable domestic operation?...

I need a step by step solutions for the 10 problems in the excel file. The correct answers are provided I only need the solutions steps. Subject is Finance (options valuation) On March 2, a Treasury...

Please give me solutions for 2 documents. I have a test soon!!! LANCASTER UNIVERSITY 2012 EXAMINATIONS PART II (SECOND AND FINAL YEAR) ACCOUNTING AND FINANCE AcF 305 INTERNATIONAL FINANCIAL...

Hi, I am doing a project for derivatives class and I have some questions about a regression and Monte Carlo simulation that I need to come up with. So the goal is to hedge against CDS instruments by...

Case Study and Exhibit #2 please please help me answer all the questions to double check my work! THANK YOU! Background In the ClearEyes Cataracts Clinic Case, we are told that Dr. Julia Connors has...

These two questions is what I will present, and please read through the case first then answer these two questions. Thank you! 1. Suppose you expected the dollar to appreciate in value by 10% against...

PLEASE COMPLETE NO LATER THAN 10/28 @3:30PM Each question(1,2,& 3) must be a minimum of 200 words. Please EXPLAIN answers in FULL detail and make answers knowledgeable based off the attached reading,...

Listen to the following videos and then complete the assignments using the changed numbers on the guidance report. Place your answers on the guidance report. Open the Guidance Report and rework the...

Spell out the steps that international advertisers should consider to cope with advertising regulations in their foreign markets.

The value of lim2- cos xv cos 2x is

A family with an annual take - home pay of $ 1 2 9 , 6 0 0 a year needs how much in its emergency fund?

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...