The price of a stock is $59, and a six-month call with a strike price of $57
Question:
The price of a stock is $59, and a six-month call with a strike price of $57 sells for $7. Round your answers to the nearest dollar.
- What is the option's intrinsic value?
What is the option's time premium?
If the price of the stock falls, what happens to the price of the call?
As the price of the stock falls, the value of the call rises or declines or does not change?
- If the price of the stock falls to $40, what is the maximum you could lose from buying the call? Enter your answer as a positive value.
What is the maximum profit you could earn by selling the call covered?
If, at the expiration of the call, the price of the stock is $65, what is the profit (or loss) from buying the call? Enter your answer as a positive value.
The profit? or loss? from buying the call is $ .?
- If, at the expiration of the call, the price of the stock is $65, what is the profit (or loss) from selling the call covered? Enter your answer as a positive value.
The profit? or loss? from selling the call covered is $ .?
- If, at the expiration of the call, the price of the stock is $41, what is the profit (or loss) from buying the call? Enter your answer as a positive value.
The profit or loss from buying the call is $ .?
- If, at the expiration of the call, the price of the stock is $41, what is the profit (or loss) from selling the call covered? Enter your answer as a positive value.
The profit or loss from selling the call covered is $ .?
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo