Question

The price of Tara, Inc., stock will be either $66 or $88 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 company's stock is $77. What is
the value of the call option if the exercise price is $62 per
share? |

Call value | $ |

b. |
Suppose the current price of the company's stock is $77. What is
the value of the call option if the exercise price is $72 per
share? |

Call value | $ |

*Call value for B is $10.28 but I don't have the value for A

Answer #1

**NO INTERMEDIATE ROUNDING IS DONE**

The price of Tara,
Inc., stock will be either $68 or $90 at the end of the year. Call
options are available with one year to expiration. T-bills
currently yield 6 percent.
a.
Suppose the current
price of the company's stock is $79. What is the value of the call
option if the exercise price is $64 per share? (Do not
round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Call
value
$
...

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a.
Suppose the current price of the stock is $78. What is the value
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(Do not round intermediate calculations and round your
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b.
Suppose the current price of...

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a.
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share? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g.,
32.16.)
b.
Suppose the current price of...

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a.
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(Do not round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
b.
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a-1
What is the value of a call option with a $50 exercise price?
(Round your answer to 2 decimal places, e.g.,
32.16.)
Call option
value
$
a-2
What is the intrinsic
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Intrinsic value
$
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What is the value of a call option with...

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If the risk-free rate is 2 percent, what is the risk-neutral
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calculations and round your final answer to 2 decimal places.
(e.g., 32.16))
Call value
$

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exercise price? (Round your answer to 2 decimal places, e.g.,
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your answer to 2 decimal places, e.g., 32.16.)
a-2. What is the intrinsic value? (Do not round intermediate
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Put option price= __________

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round your answer to 2 decimal places, e.g., 32.16.)
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