The price of Ervin Corp. stock will be either $53 or $67 at the end of the

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The price of Ervin Corp. stock will be either $53 or $67 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent.

a. Suppose the current price of the stock is $58. What is the value of the call option if the exercise price is $50 per share?

b. Suppose the exercise price is $60 in part (a). What is the value of the call option now?

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Corporate Finance

ISBN: 978-0077861759

11th edition

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

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Question Posted: Jun 22, 2017 10:09 AM

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The price of Ervin Corp. stock will be either $53 or $67 at the end of the

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