1.A call option on the stock of Bedrock Boulders has a market price of $7. The stock sells for $30 a share, and the option has an strike price of $25 a share. What is the exercise value of the call option? What is the option's time value? SHOW ALL YOUR WORK
2.The current price of a stock is $15. In 6 months, the price will be either $18 or $13. The annual risk-free rate is 6%. Find the price of a call option on the stock that has an strike price of $14 and that expires in 6 months. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume a 365-day year. Do not round your intermediate calculations. SHOW ALL YOUR WORK
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