Question

6. A call option with a strike price of $30 expires in six months. The current price of the stock is $40. What is the intrinsic value of the option? Should the option have a time premium? Is the option in-the-money or out-of-the-money?

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Answer #1

Call option is the right to buy a specified security at a specified price on a future.

Option premium has two components - intrinsic value and time value

Intrinsic value = Current stock price - Strike price

= $40 - $30

= $10

The option should have a time premium, since there option will expire in 6 months. Time period should be there to cover the risk of fluctuations in 6 months

The call option is known as in the money if the strike price is lower than the market and out of the money if it is higher.

Hence, the option is IN-THE-MONEY

5.7. The price of a European call that expires in six months and
has a strike price of $30 is $2. The underlying stock price is $29,
and a dividend of $0.50 is expected in two months and again in five
months. Risk-free interest rates (all maturities) are 10%. What is
the price of a European put option that expires in six months and
has a strike price of $30?

1. A call option with a strike price of $35 on ABC stock expires
today. The current price of ABC stock is $30. The call is:
2. A put option with a strike price of $35 on ABC stock expires
today. The current price of ABC stock is $30. The put is:
a. at the money
b. out of the money
c. in the money
d. none of the above

Consider a call option with a strike price (X) of $100 that
expires in six months (t=0.5). If the current stock price (S) is
$100, the underlying’s stock’s volatility (σ) of the stock is 0.2,
and the risk-free rate (rrf) is 5% what is N(d1)? The Excel
NORMSDIST(z) function will be helpful for this problem.

The price of a European call that expires in six months and has
a strike price of $28 is $2. The underlying stock price is $28, and
a dividend of $1 is expected in 4 months. The term structure is
flat, with all risk-free interest rates being 6%. If the price of a
European put option with the same maturity and strike price is $3,
what will be the arbitrage profit at the maturity?

Question 1:
A put option on DEF stock with a strike price of $10 expires
today. The current price of TYU stock is $13.14. The put's
intrinsic value is ___ and it is ____.
A) $3.14, out of the money
B) $3.14, in the money
C) $3.14, at the money
D) $0, out of the money
E) $0, in the money
Question 2:
A call option on GHI stock with a strike price of $17.50
expires today. The current price...

A one-year call option has a strike price of 60, expires in 6
months, and has a price of $2.5. If the risk-free rate is 7
percent, and the current stock price is $55, what should the
corresponding put be worth?
a. $5.00
b. $7.54
c. $7.08
d. $5.50

The price of a European put that expires in six months and has a
strike price of $100 is $3.59. The underlying stock price is $102,
and a dividend of $1.50 is expected in four months. The term
structure is flat, with all risk-free interest rates being 8%
(cont. comp.).
What is the price of a European call option on the same stock
that expires in six months and has a strike price of $100?
Explain in detail the arbitrage...

The premium of a call option with a strike price of $50 is equal
to $6 and the premium of a call
option with a strike price of $60 is equal to $3. The premium of a
put option with a strike price of $50
is equal to $4. All these options have a time to maturity of 6
months. The risk-free rate of interest is
7%. In the absence of arbitrage opportunities, what should be the
premium of a...

Given the following information,
price of a stock
$39
strike price of a six-month call
$35
market price of the call
$ 8
strike price of a six-month put
$40
market price of the put
$ 3
finish the following sentences.
a.
The intrinsic value of the call is _________.
b.
The intrinsic value of the put is _________.
c.
The time premium paid for the call is _________.
d.
The time premium paid for the put is _________.
At the expiration...

A put option with a strike price of $90 sells for $6.3. The
option expires in four months, and the current stock price is
$92.3. If the risk-free interest rate is 4.3 percent, what is the
price of a call option with the same strike price? (Round your
answer to 2 decimal places. Omit the "$" sign in your response.)
Price of a call option $

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